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Prob].ens    an   export 


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PROBLEMS  IN 
EXPORT  SALES  MANAGEMENT 


HARRY  R.  TOSDAL,  Ph.  D. 

PROFESSOR  OF  MARKETING 

GRADUATE  SCHOOL  OF  BUSINESS  ADMINISTRATION 
HARVARD  UNIVERSITY 


NEW  YORK 


A.  W.  SHAW  COMPANY 
CHICAGO 


LONDON 


9  0  fi  5  7 


HARVARD  PROBLEM  BOOKS 

USED  IN  THE  CASE  SYSTEM  OF 

BUSINESS  TRAINING 


MARKETING   PROBLEMS 

Kij   M.    r.   COrp^LAN'D 

PROBLEMS    IN    BUSINESS    FINANCE 

Bij  E.  E.  LINCOLN 

PROBLEMS    IN    SALES    MANAGEMENT 

Hii   H.    R.   TOSDAL 

RETAIL    STORE    MANAGEMENT 

PROBLEMS 

Bij    D.    K.    DAVID 

PROBLEMS    IN   EXPORT   SALES 
MANAGEMENT 

By   H.    R.   TOSDAL 

//(   Preparation 

PROBLEMS  IN  INDUSTRIAL  ANALYSIS 

AND  CONTROL 

Rll    D.    E.    BIRCHELL 

PROBLEMS    IN    ADVERTISING 

By  DANIEL  STARCH 

PROBLEMS   IN   BANK    MANAGEMENT 
By  W.  B.   DONHAM 

Other  Titles  Will  Be  Published  Later 


COPYRIGHT  1922 

BY 

A.  W.   SHAW  COMPA.YY 


PRINTED   IN   THE  UNITED  STATES   OF  AMERICA 


y  (o3 

CONTENTS 

Preface  v 

Table    of    Problems ix 

Chapter          I.     The  Field  of  Export  Sales  Management.  .  1 

Chapter        II.     Export  Sales  Organization 23 

Chapter      III.     Research  and  Planning  in  Export 

Trade 100 

Chapter       IV.     Export  Policies — Policies  Relating 

to  Product 162 

Chapter         V.     Export   Policies — Policies   Relating   to 

Distribution     190 

Chapter       VI.     Export  Policies — Policies  Relating  to 

Prices  and  Terms  of  Sale 265 

Chapter     VII.     Sales  Methods    310 

Chapter  VIII.     Management  of  Export  Sales  Force 359 

Chapter       IX.     Foreign    Branches     425 

^,      Chapter         X.     Financing,  Credits  and  Collections 

)  in  Export  Trade 456 

^       Chapter       XI.     Delivery  of  Export  Orders 546 

Chapter     XII.     Control  of  Export  Sales  and  General 

Problems 656 

Bibliography    687 

Bibliographical   Footnotes    695 

Index   699 

iii 


LIST  OF  FORMS 

FORM  PAGE 

1.  The   Kimball    Company — 'First   Pioposal    for    Organization 

of  Export  Department   49 

2.  The  Kimball  Company — ^Second  Proposal  for  Organization 

of  Export  Department   50 

3.  The  Crowell  Company — Organization  Chart 59 

4.  Merrill    Company — Organization    Chart 91 

5.  The   Hight   Company — ^Suggestions   for  Grouping  of  Trade 

Regions ir)l 

6.  Elden  Manufacturing  Company — Application  No.   1 385 

7.  Elden  Manufacturing  Company — Application   No.   2 386 

8.  Elden  Manufacturing  Company — Application   No.    3 387 

9.  Elden   Manufacturing  Company — Application  No.   4 388 

10.  Elden  Manufacturing  Company — Application   No.   5 389 

11.  Circular  Letter  of  Credit,  Front 412 

12.  Circular  Letter  of  Credit,  Reverse 413 

13.  Letter   of   Indication 414 

14.  Savoy  Shoe   Company — Credit  Report  Form 486 

15.  Savoy  Shoe  Company — Credit   Report  Fonn — Reverse 487 

16.  Garfield   Talking  Machine  Company — Foreign  Drafts 534 

17.  Garfield  Talking  Machine  Company — Banker's  Acceptance  535 

18.  Garfield  Talking  Machine  Company — Collection  Instrument  536 

19.  Whitmore   Rubber   Company — Subscribers'    Inquiry 538 

20.  Whitmore  Rubber  Company — Request   of   Bureau   to   Mem- 

bers    539 

21.  Whitmore  Rubber  Company — ^Bureau  Report  to  Members.. 540 

22.  Whitmore  Rubber  Company — Supplementary  Report   541 

23.  Kingsley  Company — Forwarder's   Functions    574 

24.  Hartman   Rubber   Company — Instructions   to   Forwarders.  .576 

25.  Detailed  Special   Instructions  Form 604 

26.  Dock  Receipt   605 

27.  Letter  of  Instructions  606 

28.  Consular   Invoice    607 

29.  Face  of  Export  Declaration    608 

30.  Reverse  of  Export  Declaration 609 

31.  Bill  of  Lading 620 

32.  Commercial    Invoice    622 

33.  Certificate  of  Insurance 623 

34.  Reverse  of  Certificate  of  Insurance 624 

35.  Draft 625 

36.  Notification    Letter    to    Customer 626 

37.  Form  for  Notifying  Bank 627 

38.  Face    of    Insurance    Certificate 629 

39.  Reverse  of  Insurance  Certificate 630 

40.  Insurance    Policy 634 

41.  Ocean  Bill  of  Lading 641 

iv 


PREFACE 


MANY  American  business  men  have  been  accus- 
tomed to  regarding  foreign  trade  as  a  branch  of 
commerce  governed  by  laws  and  principles  differ- 
ing radically  from  those  which  apply  to  domestic  trade. 
This  seems  to  be  due  to  two  fundamental  factors,  the  first 
of  which  is  the  lack  of  international  viewpoint,  which 
characterizes  citizens  of  the  United  States.  This  provin- 
cialism is  in  part  historical  in  origin,  growing  out  of  the 
nature  of  the  economic  development  of  the  country.  The 
vast  resources  of  the  country,  the  development  of  new 
enterprises,  and  the  combined  growth  of  older  ones  have 
furnished  an  opportunity  for  each  younger  generation 
which  could  not  be  equaled  in  foreign  trade.  There  has 
been  no  economic  reason  why  a  young  man  should  ex- 
patriate himself,  at  least  no  reason  suflSciently  strong  to 
cause  him  to  depart  from  the  general  custom  of  the  young 
men  of  his  class.  The  second  reason  for  the  misconcep- 
tion regarding  foreign  trade  is  due  to  the  over-emphasis 
accorded  to  the  differences  between  foreign  and  domestic 
trade  and  to  the  corresponding  under-emphasis  regard- 
ing similarities.  The  lack  of  international  viewpoint  is 
still  a  serious  obstacle  to  the  development  of  foreign 
trade,  although  the  war  has  had  an  enormous  influence 
in  the  direction  of  broadening  the  information  of  Amer- 
ica generally  regarding  foreign  countries. 

In  fundamentals  foreign  trade  is  the  same  as  domestic 
trade.  The  broad  considerations  involved  in  building 
an  export  organization,  in  fixing  the  character  of  re- 
search and  planning,  in  choosing  correct  policies  and  in 
conducting  sales  operations  are  essentially  the  same  as 
those  prevaihng  in  the  home  market.  However,  the 
nature  and  extent  of  the  knowledge  which  the  domestic 
sales  executive  may  expect  to  find  in  the  average  recruit 
to  the  domestic  sales  personnel,  whether  taken  from  gram- 


vi  PREFACE 

mar  school,  high  school,  a  higher  institution  of  learning, 
or  from  other  concerns,  is  vastly  greater  than  the  knowl- 
edge which  the  export  sales  executive  may  expect  to  find. 
The  result  has  been,  first,  a  limitation  of  the  number  of 
available  candidates  for  foreign  trade  positions;  sec- 
ondly, a  necessity  of  training  such  candidates  as  are  ac- 
cepted; and,  lastly,  the  development  of  an  exaggerated 
idea  of  the  differences  between  foreign  and  domestic 
marketing.  Training  for  foreign  trade  should  be  funda- 
mentally the  same  as  training  for  domestic  trade ;  though 
in  the  more  specialized  training,  the  examples  and  appli- 
cations of  general  business  principles  should  be  made 
with  reference  to  foreign  transactions. 

Export  sales  management  should  occupy  the  same 
place  in  the  equipment  of  the  export  executive  that  domes- 
tic sales  management  does  in  the  equipment  of  the  domes- 
tic sales  manager.  Exporting  is  essentially  selling  outside 
the  boundaries  of  the  United  States.  It  bears  the  same 
relation  to  importing  that  selling  does  to  purchasing. 
There  should  be  as  clear-cut  a  division  in  the  treatment 
of  importation  and  exportation  as  is  common  between 
sales  management  and  purchasing.  In  its  approach  to 
the  general  subject  of  export  management,  the  present 
volume  has  no  precedent  to  serve  as  a  guide.  My  earlier 
conviction  that  the  export  manager  to  be  successful  must 
approach  his  business  problems  as  any  other  business 
executive  has  been  strengthened  by  contact  with  many 
leading  export  executives,  while  collecting  material. 

Without  exception,  the  executives  whom  we  have  ap- 
proached have  received  us  cordially;  they  have  given 
generously  of  their  time  and  experience  to  help  us  in 
this  undertaking.  To  them  and  to  the  friends  of  the 
school  whose  assistance  made  possible  the  necessary  field 
work  we  express  our  deep  appreciation.  I  am  especially 
indebted  to  Mr.  Cecil  E.  Eraser,  who  as  special  agent  of 
the  Bureau  of  Business  Research  has  assisted  me  not 
only  in  the  collection  of  material  during  various  field 
trips  but  also  in  applying  the  experience  of  the  Bureau  of 
Business  Research  in  the  presentation  of  problem  mate- 
rial.   To  the  Director  of  the  Bureau,  Professor  Melvin  T. 


PREFACE  vii 

Copeland,  I  wish  also  to  express  my  thanks  for  valuable 
assistance;  likewise  to  Dean  Wallace  Brett  Donham, 
whose  active  support  and  encouragement  are  responsible 
for  the  present  appearance  of  this  volume.  Mr.  B.  Olney 
Hough  and  Mr.  Walter  F.  Wyman  have  also  been  ex- 
tremely kind  in  giving  me  the  benefit  of  their  criticism 
of  a  number  of  the  problems.  Lastly,  much  credit  should 
be  given  to  the  writer's  secretary,  Mrs.  Elsie  Hight  Tara- 
soff,  whose  efficient  assistance  at  all  stages  has  rendered 
the  task  much  less  difficult  than  it  would  othermse  have 
been. 

H.  R.  T. 
Caml)ridgo,  Massachusetts,  July  12,  1922. 


TABLE  OF  PROBLEMS 

1.  Reddington  Company — Location  of  Export  Department     34 

2.  Nash  Company — Splitting  the  Export  Department.  ...      36 

3.  The     Northern     Electric     Company — Splitting     Export 

Department  between  Plant  and   New   York 37 

4.  The     MacKusick     Paint     Company — Organization     for 

Direct    Exporting 39 

5.  Baer  Manufacturing  Company — Organization  of  Export 

Department    42 

6.  Kimball    Company — Organization    of    Export    Depart- 

ment           47 

7.  The   Hammett    Company — Committee    Organization    as 

Applied  to  Export  Department 61 

8.  The    Townsend    Rubber    Company — Functional    Organ- 

ization of  the  Export  Department 56 

9.  The    Crowell    Company — Organization    of    a    Separate 

Export  Company    .  .  .  .' 59 

10.  Lybrand  Manufacturing  Company — Export  Commission 

Houses  versus  Export  Association    62 

11.  The  Reardon  Saw  Company — Withdrawing  from  Export 

Association  under  Webb  Law    66 

12.  Winthrop  Company — Cooperative  Export  Department; 

Combination  Export  Manager    69 

13.  Motor    Accessories    Corporation    and    Forest    Machine 

Company — Adapting  Export  Organization  to  Product 
and   Resources    71 

14.  Cotton  Braid  Associates — Division  of  Sales   Organiza- 

tion by  Territory  or  by  Goods 73 

16.     American  Export  Corporation — Organization  from  Ter- 
ritory or  Product  Standpoint 76 

1 6.  The  Export  Executive    78 

17.  Hardee    Hat    Company — Developing    Export    Manager 

from    Own    Organization    versus    Securing    Manager 

Outside    81 

iz 


c         PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

18.  Williamson   Company- — Employing   Foreign    Regulation 

Expert 83 

19.  The  Riley  Company — Handling  of  Foreign  Correspon- 

dence          85 

20.  Reardon   Company — Dividing   Line    Between    Domestic 

Sales  and  Export  Departments 87 

21.  Merrill  Company — Cooperation  of  Domestic  Sales  and 

Export  Departments    90 

22.  Fiske  Company — Advertising  Agency  vs.   Development 

of  Foreign  Advertising  Department    93 

23.  Leonard    Company — Should    the    Export    or    Domestic 

Credit   Department    Handle    Foreign   Credits  ? 95 

24.  Gray  Hat  Company — Relation  of  Export  and   Produc- 

tion  Departments     97 

25.  Brackett  Fire  Apparatus  Company — Field  Trips 113 

26.  Gary  Typewriter  Company — Study  of  the  Market....    114 

27.  Rand    Safety    Razor    Company — Market    Analysis    in 

Selection  of  Agents   116 

28.  Burbank    Adding    Machine    Company — Desk    Research 

vs.  Field  Research 124 

29.  The  Self-Operating  Scale   Company — Market   Analysis 

of   Australia   and    Argentina    127 

30.  The  James  &  King  Company — Analysis  of  South  Ameri- 

can Market  for  Photographic  Material 130 

31.  Middle  Western  Association  of  Garment  Manufacturers 

— Analysis  of  the  Demand  in  South  American  Mar- 
kets for  Women's  Ready-made  Garments 139 

32.  The  Hight  Company — Districting  of  Sales  Territory.  ,    148 

33.  Pittsfield  Paper  Company— Establishing  Quotas 154 

34.  Red    Star    Shoe    Company — Planning    Sales    Districts, 

the  Routing  of  Salesmen,  and  a  Sales  Campaign 158 

35.  Simplex   Razor   Company — Changing    Product   to   Meet 

Foreign   Demand    165 

36.  Talbot   Electric  Wire   Company — Changing  Product  to 

Meet  Competition 170 

37.  The  White  &  Russell  Company— Style  Policy 171 


TABLE  OF  PROBLEMS  xi 

38.  Hollywood  Typewriter  Company — Policy  as  to  Finish.    172 

39.  Federated  Woolen  Company — Handling  of  Cotton  Tex- 

tiles and  Other  Allied  Lines    175 

40.  Tower    Company — Repair    Service    and    Contract    for 

Agents    Furnishing   Service    177 

41.  The  Shedd  Rubber  Company — Service  and  Guarantee.    180 

42.  The  Shaler  Company— Brand  Policy 182 

43.  Federated    Paper     Company — Registration    of     Trade- 

Marks     184 

44.  Williams  &  Knox  Company — Policy  of  Export  Commis- 

sion House    188 

45.  The    Twitchell    Company — Commission    House    versus 

Own  Salesmen    201 

46.  The  Mills  and  Marks  Company— Distribution  Policy..    205 

47.  The  Samuel   Paper   Company — Contracts   with   Export 

Houses     211 

48.  The    Rollins    Paper    Company — Contract    for    Foreign 

Distribution    216 

49.  Stuart   Company — Commission    House   vs.    Combination 

Export    Manager    220 

50.  The   Logan   Company — Choice   of    Methods    in    Export 

Selling \ 222 

51.  Baker-Greene     &     Company — General     Importers     as 

Agents  versus  Sale  to  Foreign  Dealers 224 

52.  Nichols  Company — Branch  vs.  Foreign  Wholesalers...    227 

53.  Morrow  Safety  Razor  Company — Manufacturers'  Rep- 

resentatives        229 

54.  The  Murray  Company — Use  of  Wholesalers  as  Agents ; 

Wholesale  and  Retail  Agents   231 

55.  Modern  Oil  Company — Question  of  Giving  Up   Native 

Agents   in   China    234 

56.  Bennett  Manufacturing  Company — Exclusive  Agency.  .  235 
'57.  Hartman  Piano  Company — Securing  Agency  for  Pianos  237 
58.     Rand  Smith  &  Company — Granting  Agencies   240 


xii      PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

59.  Mathews    &    Wolfe    Company — Exclusive    Agency    and 

Advertising   246 

60.  Kilton    Typewriter    Company — Essentials    of    Contract 

with  Foreign  Agency    251 

CI.     Houghton  Cotton  Mill — Exclusive  Agency 267 

62.  Gardner    Office    Equipment    Company — Completion    of 

Contract  with  Foreign  Agent 260 

63.  Caledonia  Typewriter  Company — The  Appointment  of 

Sub-Agents    261 

64.  The    Vandermann    Shoe    Company — Determination    of 

Price    Level    269 

65.  Chandler  Company — Price  Competition   270 

66.  Guild   Company — Adjustments    274 

67.  The  Wolfe  Company— F.  O.  B.  versus  C.  I.  F 276 

68.  Tlie   Carlton   Drug   Company — Quoting   Net    Prices   in 

Dollars  F.  O.  B.  Seaboard  versus  Quoting  List  Prices 

in  Foreign  Currencies  C.  I.  F 279 

(69.     Southwest  Cooperage  Company — Quotation  of  Prices .  .    290 

70.  Morrison      Manufacturing      Company — Uniformity      of 

Selling   Price    295 

71.  Cotton    Braid    Associates — Price    Variation    to    Cover 

Credit  Terms    298 

72.  McDermott  Company — Fixed  Prices  versus  Price  Varia- 

tion by  Salesmen    300 

73.  Calkins   Talcum   Powder   Company — Cash   Discounts..   301 

74.  Calkins  Talcum  Powder  Company — Quantity  Discounts  303 

75     The    Morrow    Safety    Razor    Company — Price    Mainte- 
nance      306 

76.  Saunders    Sewing    Machine    Company — Price    Mainte- 

nance       306 

77.  The  Camden  Hosiery  Company — Price  Policy  . 308 

78.  National  Machine  Tool  Corporation — Choice  of  Selling 

Methods     321 

79.  The   Madden   Company — ^Developing   New   Territory.  .    323 

80.  The  Dunn  Company — Clioice  of  Selling  Methods    ....    326 


TABLE  OF  PROBLEMS  xiii 

81.  Hamilton  Oil  Company — Additional   Branches   vs.   Ad- 

vertising        327 

82.  Washington  Motor  Car  Company — Foreign  Advertising  329 

83.  Reingold      Sewing      Machine      Company — Advertising 

Policy    334 

84.  Pembroke  Office  Equipment  Company — Advertising  by 

Principal  or  Agents 33g 

85.  Barcelona     Talking     Machine     Company — Control     of 

Foreign   Advertising    337 

86.  The  Gates  Optical  Company — Developing  Export  Sales 

by  Correspondence 34O 

87.  The  Rodgers  Machine  Manufacturing  Company — Cata- 

logs for  Foreign  Trade 342 

88.  Federated  Paper  Company — House  Organ   345 

89.  Volk  Paint  Company— Methods  of  Sales  Stimulation .  .    347 

90.  The    Widlund    Company — Selling    or    Leasing    Textile 

Machinery     okq 

91.  The     Mellor     Milling     Company— Long-time     Credits 

versus   Shipping  on   Consignment    35 1 

92.  The  Maddox  Export  Company— Dealing  on  Joint  Ac- 

count    353 

93.  Cotton    Braid    Associates— Allocation    of    Orders    and 

Credit  Losses  in  Export  Association 354 

94..     Eastern  Export   Managers'  Association— Qualifications 

of  Export  Salesmen ggg 

95.  Jefferson  Automobile  Company— Selection  of  Salesmen.    370 

96.  The  Rush   Oil  Company— Application   Blanks   for   Ex- 

port   Salesmen    3,^4 

97.  Elden    Manufacturing   Company— Selection    of   Export 

Salesmen    0^4 

98.  Giles    Paper    Company— Should    Native    Salesmen    Be 

Employed  in  Preference  to  Americans  > 387 

99.  Volk  Paint  Company— Training  of  Salesmen 391 

100.  The  Atlantic  Electric  Company— Training  of  Salesmen  394 

101.  Thompson  Paint  Company— Methods  of  Paying  Foreign 

^^^^«"^^"    .    402 


xiv      PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

102.  Sandock  Company — Pay  of  Salesmen    404 

103.  Morse    Paper    Company — Export    Salesmen — Advance 

Territory  Work    406 

104.  Wadswortli  Company — Equipment  of  Foreign  Salesmen  409 

105.  The  Volk  Paint  Compan}'^ — Cooperation  of  the  Export 

and  Other  Departments   with   P'oreign   Salesmen.  ...    415 

106.  Kagan  Company — Handling  of  Salesmen 417 

107.  The  Volk  Paint  Company — Stimulation  of  Sales  Force  420 

108.  Volk  Paint  Company — Control  of  Salesmen 422 

109.  Marshall     Ink     Company — Retaining     or     Abandoning 

Foreign  Branches 428 

110.  Waldron    Piano    Company — Establishment    of    Branch 

Factories  and  Assembling  Plants    429 

111.  The     Safe-Edge     Razor     Company — Incorporation     of 

Branches    434 

112.  The  Sawyer  Company — Establishing  a   Foreign  Ware- 

house        439 

113.  Fernald  Sewing  Machine  Company — Stocks   at  Selling 

Offices     440 

114.  Russell  Company — Closing  of  Foreign  Office 443 

115.  Hoffman    Oil    Company — Powers    of    Branch    Manager 

and  Organization  of  Branch    445 

116.  Faxon  Typewriter  Company — Power,  Duties,  and  Com-. 

pensation  of  Branch  Managers    448 

117.  Gendron    Press    and    Paper    Company — Should    Branch 

Managers  Fix  the  Price .'' 452 

118.  Federated  Paper  Company — Transfer  of  Branch  Man- 

agers         454 

119.  Garfield      Talking      Machine      Company — Discounting 

Drafts  versus  Bank  Loans    462 

120.  The  Sanford  Motor  Car  Company — Methods  of  Financ- 

ing   Foreign    Shipments     464 

121.  The  Chapman  Company — Policy   Regarding  Extension 

of  Credit 470 

122.  The  Lundstrom  Company — Extending  Credit  Terms  be- 

cause  of   Competition    473 


TABLE  OF  PROBLEMS  xv 

123.  Washburn  Company — Curtailing  Credit  in  Time  of  De- 

pression       475 

124.  Emerson  &  Company — Credit  Information    477 

125.  The  Jorgensen  Shoe  Company — Granting  Credit  Based 

on    Capability    of    Foreign    Dealers    and    Conditions 
Abroad     480 

126.  Savoy   Shoe   Company — Methods   of    Securing   and    An- 

alyzing Credit  Information 484 

127.  Whitmore   Rubber   Company — Foreign    Credit    Associa- 

tion         492 

128.  Pike  Company — Credit  Insurance    496 

129.  Romanos    &    Garcia,    New     England    Hardware    Com- 

pany—Granting of  Credit  on  Open  Account  Terms.  .497 

130.  Arabian    Steel    Company — Cancellation    of    Letter    of 

Credit     500 

131.  Harris    Hardware   Company — Determining   Whether   or 

Not  Credit  Should  be  Granted  to  Foreign  Customers    504 

132.  The  Eliot  Compan^^ — Abuse   of  Credit 509 

133.  The  Eliot  -Company — Credit  Procedure    512 

134.  Bradford    Bolt    Company — Handling    Depreciated    Ex- 

change  Cases    515 

135.  Bryzlak  &  Company — Act  of   Protest    519 

136.  Wine  Shooks — Statement  of  Claims    526 

137.  Grisby  and  Randall — Exportation  of  Coal    529 

138.  The  Export  Shoe  Company — Handling  Orders    550 

139.  MacLean  Company — Routing  of  Orders    552 

140.  Denby  Company — Packing  Goods   for  Export 554 

141.  The  Hood  Adding  Machine  Company — Packing  of  Ma- 

chinery         558 

142.  The  Murray  Company — Changing   Packing   Methods..    559 

143.  National     Packing     Machine     Company — Methods      of 

Packing 562 

144.  Reid  Chemical   Export  Company — Inspection  of  Cargo   564 

145.  Thompson   Roofing    Company — Preventing    Damage    in 

Shipment 566 


xvl      PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

I  AG.      Parker    Tire     ALinufaetnring    Company — Packing    and 

Sliipping   (ioods    for    Export    568 

147.  Kingsley   Company — Freiglit   Forwarding  Service    ....    572 

148.  Hartnian    Rubber   Company — Shipping    Instructions    .  .    575 

149.  The   Noonan   Export  Company — Avoiding   Mistakes   in 

Orders,  and  Contracts    578 

150.  Fales  Tire  Patch  Company — Filling  Foreign  Orders   .  .    580 

151.  Page  Export  Corporation — Establishment  of  New  York 

Warehouse     582 

152.  Ellwood  Company — Bargaining  for  Ocean  Freight  and 

Insurance     684 

153.  Diamond  Alkali  Export  Corporation  b.  Fl.  Bourgeois — 

Bills  of  Lading  and  Insurance  Certificates 586 

154.  The  Starr  Company — Collection  of  Insurance  Claims.  .    600 

155.  Harmonia   Gramophone    Company— Control   of   Sales..    659 

156.  The  Mott  Company — Branch  Managers'   Reports    ....    662 

157.  Holden  Tool  Company — Perpetual  Inventory  System..    664i 

158.  Jewel  Electric  Appliance  Company — Planning  a  Budget  667 

159.  Myers  &  Company — Continuing  of  Foreign  Trade   ....    674 

160.  Independent  Woolen  Export   Corporation — Liquidating 

of  Export  Business 677 

161.  Tlie     Baldwin     Locomotive     Works — Pushing     Foreign 

Trade  During  Depression 679 

162.  Oilman  Company — Establishing  a  Canadian  Mill    ....    681 

163.  The     Kane     Shoe     Company — Discontinuing    Canadian 

Plant    682 

164.  The  Rockford  Company — Government  Action  in  the  Ex- 

port Field   684 


CHAPTER  1 


THE  FIELD  OF  EXPORT  SALES 
MANAGEMENT 

THAT  foreign  trade  is  necessary  to  the  welfare  of 
nations  has  been  more  generally  admitted  by  busi- 
ness men  of  our  country  during  the  past  few  years 
than  ever  before.  While  other  nations  have  accepted  this 
as  a  matter  of  course,  the  United  States  wiih.  its  vast  re- 
sources and  possibilities  of  development  has  felt  less  the 
need  for  international  exchange  of  goods  than  nations  not 
so  richly  endowed  by  nature.  Foreign  trade  is  influenced 
profoundly  by  political,  social,  and  economic  conditions 
throughout  the  worlds  and  the  problems  of  readjustment 
after  a  world  catastrophe  have  never  been  more  fully 
reahzed  and  recognized  than  today.  However,  the  fact 
that  foreign^  trade  involves  manifold  executive  problems 
has  often  been  obscured  by  the  broader  problems  of  inter- 
national relationships.  Less  attention  has  been  paid  to 
the  problems  of  the  business  executive,  who  must  try  to 
carry  on  his  business  whether  political,  financial,  or  eco- 
nomic conditions  are  entirely  to  his  liking  or  not.  While 
it  is  essential  that  for  his  greatest  success  he  should 
know  the  nature  of  mass  movements  and  the  progress  of 
political  and  trade  development,  the  immediate  problems 
of  his  business  enterprise  are  those  involved  in  attaining 
the  purposes  of  every  business  enterprise ;  that  is,  making 
a  profit.* 

*The  basis  of  economic  theory  of  international  trade  is  to  be  found  in 
Taussig,  Principles  of  Economics,  Third  Edition,  1922;  Volume  I,  Book 
IV;  Marshall,  Industry  and  Trade,  Book  II;  and  the  more  specialized 
works,  such  as  H.  G.  Brown,  International  Trade  and  Exchange;  and  C.  F. 
Bastable,  The  Theory  of  International  Trade.  All  the  general  works  upon 
foreign  trade  and  exporting  contain  material  regarding  the  benefits  of 
foreign  trade.  Interesting  discussions  may  be  found  also  in  the  proceed- 
ings of  the  National  Foreign  Trade  Conventions,  especially  the  addresses 
of  Messrs.  Alexander,  Lichtenstein,  and  Sconce  at  the  1922  Convention. 

1 


2       PROBLEMS   IN   EXPORT  SALES  MANAGEMENT 

The  problems  of  foreign  trade  include  all  the  problems 
of  domestic  trade  complicated  by  the  fact  that  every  for- 
eign transaction  must  comply  with  the  laws  of  two  juris- 
dictions ;  and  secondly  by  the  fact  that  adjustment  must 
be  liiade  to  greater  differences  between  buyer  and  seller 
than  exist  in  domestic  transactions.  The  executive  prob- 
lems of  foreign  trade  may  be  grouped  as  follows :  first,  the 
problems  of  selling,  including  all  those  problems  relating 
to  the  selling  of  goods  and  the  utilization  of  such  f  acilita- 
tive  agencies  as  exist  to  aid  sale  or  delivery.  This  in- 
cludes the  creation  of  selling  organization  and  the  opera- 
tion of  that  organization  so  as  to  secure  a  profit.  The 
second  group  of  problems  includes  those  of  buyers ;  that 
is,  problems  of  import  management.  The  view-point  is  of 
course  that  of  the  purchasing  executive  located  in  an  im- 
port house  or  in  the  import  department  of  a  manufactur- 
ing, wholesale,  or  retail  concern.  In  addition  to  the 
problems  of  control  there  is  the  broad  group  of  prob- 
lems relating  to  financing  of  foreign  trade  and  the 
management  of  credit.  Banking  facilities  exist  primarily 
for  the  purpose  of  assisting  commerce.  Their  effective 
utilization  furnishes  problems  for  sellers  and  buyers,  but 
the  management  of  such  facilities  so  as  to  perform  effec- 
tive service  offers  a  series  of  problems  which  have  not 
been  fully  comprehended.  The  problems  relating  to 
physical  delivery  of  goods  constitute  a  fourth  group  with 
reference  to  the  management  of  transport  and  other  facil- 
ities so  as  to  bring  about  efficient  delivery  of  goods  in 
both  import  and  export  trade.  The  executive  problem  of 
shipping  management,  railroad  organization  and  ojjera- 
tion  all  come  under  this  general  heading.  In  normal  times 
the  management  of  all  these  facilities  is  articulated  so  as 
to  perform  numberless  individual  operations  with  mini- 
mum unit  effort,  in  spite  of  the  resulting  complexity  of 
organization. 

Successful  solution  of  the  problems  of  buying  and  sell- 
ing in  the  international  market  depend  in  large  measure 
upon  full  realization  of  the  essential  characteristics  and 
the  essential  differences  between  various  markets.  A  na- 


FIELD  OF  EXPORT  MANAGEMENT  3 

tive  of  one  country  has  ordinarily  no  opportunity  to  ab- 
sorb the  fund  of  information  concerning  other  countries 
that  he  does  consciously  or  unconsciously  concerning  his 
own.  Proper  management  of  foreign  operations  requires 
specific  and  detailed  knowledge  of  foreign  markets  and 
foreign  peoples  and  furnishes  justification  for  specialized 
study  of  such  markets.  It  is  with  the  first  of  these  groups 
of  problems — namely,  those  concerning  sellers — that  the 
present  volume  is  concerned. 

As  the  term  is  used  in  this  volume,  Export  Sales  Man- 
agement is  that  branch  of  sales  management  relating  to 
the  performance  of  marketing  functions  in  transactions 
with  foreign  buyers.  The  point  of  view  is  the  same  as 
the  domestic  sales  manager's,  namely  that  of  the  execu- 
tive of  the  business  enterprise.  "While  in  many  organiza- 
tions foreign  transactions  are  handled  by  a  department 
which  is  independent  of  the  domestic  sales  department, 
the  functions  performed  by  each  department  are  essen- 
tially similar  in  nature  and  the  problems  involved  in  the 
performance  of  those  functions  are  of  the  same  types. 
Export  management  refers,  therefore,  to  the  management 
of  those  agencies  which  are  necessary  for  the  perform- 
ance of  the  marketing  functions  in  foreign  trade.  The 
prime  function  of  the  export  department  is  that  of  sell- 
ing in  foreign  markets ;  in  this  it  differs  from  the  domes- 
tic sales  department  only  as  to  the  field  in  which  the 
operations  are  to  be  conducted.  The  success  of  the  ex- 
port department  in  the  performance  of  its  selling  func- 
tions is  dependent  in  varying  degrees  upon  the  perform- 
ance of  other  marketing  functions.  The  export  depart- 
ment must  arrange  at  times  for  the  storing  of  finished 
goods,  as  well  as  for  their  movement  into  the  hands  of 
customers  and  the  financing  of  sales  within  limits  imposed 
upon  it  by  administrative  action.  While  the  general  regu- 
lation of  finance  and  general  financial  policies  are  gov- 
erned by  separate  ofiicials  or  separate  departments,  the 
export  department  is  profoundly  affected  by  such  limita- 
tions and  by  the  policy  which  it  finds  necessary  to  adopt 
regarding  credits  and  terms  of  sales  in  the  development 
of  the  particular  market. 


4       PROBLEMS   IN  EXPORT   SALES  MANAGEMENT 

Export  organizations  vary  widely,  therefore,  in  the 
extent  to  which  they  perform  the  various  marketing  func- 
tions. Two  basic  reasons  may  be  advanced  for  this  situ- 
ation. First,  the  variation  in  the  position  of  the  export 
department  in  the  business  organization  and  the  admin- 
istrative hmitations  placed  upon  it  by  the  board  of  direc- 
tors and  their  appointees  naturally  affect  the  scope  of  its 
operations  and  the  methods  of  performing  its  functions. 
Secondly,  specialized  agencies  exist  and  may  be  used  to  a 
greater  or  less  extent  by  the  export  department  for  the 
performance  of  certain  functions.  The  field  of  export  man- 
agement is  consequently  ill-defined ;  in  fact,  such  study  of 
management  in  foreign  trade  as  has  been  made  has  usu- 
ally given  much  attention  to  export  from  the  general 
or  public  point  of  view  with  a  brief  consideration  of  im- 
portation— in  other  words,  a  consideration  of  purchasing 
has  been  included  with  the  study  of  selling.  The  impor- 
tance of  import — both  actual,  as  shown  by  statistics,  and 
theoretical,  as  demonstrated  in  economic  reasoning  is 
such  as  to  require  more  adequate  study. 

The  scope  of  export  sales  management  is  the  same  as 
that  of  sales  management,  including  the  performance  or 
supervision  of  practically  all  the  marketing  functions — 
storing,  risk-taking,  financing,  grading,  selling,  and  de- 
livery,* The  functions  which  would  be  performed  by  the 
individual  organization  would  of  course  vary  widely  ac- 
cording to  method  of  sale,  financial  circumstance  of  the 
concern,  type  of  product,  and  other  factors.  It  is  evi- 
dent   that    the    character    of    an    export    organization, 

*The  marketing  functions  are  the  same  in  international  as  in  domestic 
trade.  While  functional  analysis  of  marketing  has  so  far  been  confined  to 
treatises  upon  domestic  marketing,  these  discussions  are  helpfiil  in  the 
study  of  foreign  trade.  According  to  L.  D.  11.  Weld,  American  Economic 
Eeview,  June,  1917,  page  306,  the  nuirketiiig  functions  are  assembling, 
assumption  of  risk,  storing,  financing,  selling,,  rearrangement,  transporta- 
tion; according  to  A.  W.  Shaw,  An  Approac)^  to  Business  Probleins,  i)age 
157,  the  functions  are  (1)  sharing  tlie  risk;  (2)  transporting  tlie  goods; 
(3)  financing  the  operation;  (4)  selling  or  demand  creation;  (5)  assem- 
bling, assorting,  or  resliipjiing  the  goods.  P.  T.  Cheriugton  chissifies  nuxr- 
keting  functions  other  than  the  prime  function  of  selling  as  merchandising 
functions,  including  assembling,  grading,  storing,  and  transporting,  and 
auxiliary — financing,  assuming  risk.  Cf.  also  H.  B.  Vanderblue,  American 
Economic  Review,  June,  1921,  page  292 1  and  C,  S,  Duncan,  Marketing: 
Its  Problems  and  Methods, 


FIELD  OF  EXPORT  MANAGEMENT        5 

which  plans  to  sell  typewriters  to  consumers  in  for- 
eign lands,  will  vary  widely  from  that  of  the  house 
exporting  certain  textiles,  which  it  plans  to  sell  through 
wholesalers.  On  the  other  hand,  the  small  concern  manu- 
facturing typewriters  may  adopt  an  organization  which 
is  quite  different  from  that  of  a  concern  which  is  large, 
well  established  in  the  domestic  market,  and  with  ample 
resources  to  give  it  choice  of  method,  to  enable  it  to 
estabhsh  branches,  service  stations,  and  subsidiary 
companies  w^herever  it  may  deem  advisable.  In  essen- 
tials, how^ever,  the  differences  between  specific  export 
sales  organizations  are  the  same  as.  those  which  prevail 
among  domestic  sales  organizations.  A  small,  poorly 
financed  maimfacturing  company,  the  bulk  of  whose  re- 
sources is  required  for  manufacturing  operations,  may 
find  it  to  its  advantage  to  shift  the  financial  burden  of 
direct  selling  and  undertake  indirect  selling  or  refrain 
from  foreign  markets  altogether.  It  is  evident  that  many 
of  the  fundamental  policies  affecting  export  trade  are 
determined  not  by  the  export  manager,  but  by  the  funda- 
mental characteristics  of  the  enterprise  as  to  product, 
financial  resources,  and  personality  of  executives;  but 
mthin  these  limitations,  the  function  of  the  export  de- 
partment is  to  perform  or  to  cause  to  be  performed  satis- 
factorily all  the  operations  necessary  to  secure  to  the 
company  a  net  profit  from  export  operations. 

The  export  organization  will  consist  of  an  export  exec- 
utive and  such  subordinates  and  assistants  as  may  be 
required  by  the  nature  of  the  work  and  the  size  of  the 
concern,  their  work  being  divided  upon  a  functional,, 
territorial,  or  other  basis.  If  the  manufacturing  plant 
is  located  inland,  the  location  of  the  export  department 
becomes  a  matter  of  very  considerable  interest.  There 
is  fairly  evenly  divided  difference  of  opinion  among  ex- 
port managers  as  to  the  balance  of  advantage  between 
inland  location  of  the  export  department  at  the  plant  and 
location  of  the  export  department  at  a  port.  Current 
practice  of  business  concerns  shows  application  of  both 
solutions  of  the  problem,  although  occasionally  a  com- 


6       PROBLEMS   IN  EXPORT   SALES   MANAGEMENT 

promise  in  the  nature  of  splitting  the  export  department 
between  the  plant  and  the  port  is  to  be  noticed. 

The  concern,  which  is  entering  a  foreign  field  and  finds 
it  necessary  to  engage  in  functional  specialization,  is  usu- 
ally compelled  to  adopt  more  or  less  definitely  one  of  two 
general  courses  of  organization:  first,  the  course  of 
organization  where  the  export  operations  are  regarded 
as  essentially  sales  operations  of  a  nature  similar  to  other 
domestic  operations  and  where  accordingly  the  functional 
executives  should  be  responsible  to  the  limit  of  their 
capacity  for  both  export  and  domestic  sales.  That  is, 
the  sales  manager  becomes  a  sales  manager  for  both 
foreign  and  domestic  fields,  the  credit  department  handles 
both  domestic  and  foreign  credits,  the  packing  depart- 
ment is  not  divided  into  export  and  domestic  packing 
sections.  In  the  formation  of  an  export  department 
termed  a  "built-in"  export  department,  there  is  clearly 
the  assumption  that  greater  homogeneity  is  obtained  by 
specialization  according  to  functions  than  by  specializa- 
tion according  to  area  in  which  functions  are  to  be  per- 
formed. While  in  the  large  export  departments  the 
''built-in"  feature  may  imply  merely  an  areal  specializa- 
tion among  subordinates  rather  than  among  superiors, 
there  is  no  doubt  that  the  built-in  department  presents 
a  strong  appeal  for  many  business  concerns,  though  the 
successful  operation  requires  possibly  greater  knowledge 
and  a  broader  type  of  mind  on  the  part  of  more  execu- 
tives in  a  business  than  might  be  required  by  the  second 
type  of  export  department  called  the  "specialized"  ex- 
port department. 

The  separate  export  department  may  be  located  in  the 
business  concern  as  a  section  of  the  general  sales  depart- 
ment in  charge  of  a  sales  manager,  who  supervises  all  the 
operations  subject  to  the  direction  of  the  sales  manager 
or  other  executives.  Not  infrequently  the  separate  ex- 
port department  is  coordinated  with  the  general  sales  de- 
partment. It  is  obvious  that  such  a  department  provides 
the  means  for  greater  specialization,  which  may  not  be 
ail  i:idvc^ntage.    It  implies  the  maiutenauce  of  a  separate 


FIELD  OF  EXPORT  MANAGEMENT        7 

export  executive  and  an  export  staff  wltieh,  for  the  small 
concern  or  the  concern  whose  export  trade  is  not  devel- 
oped rapidly,  implies  an  increase  in  selling  expense  and 
at  least  a  period  in  which  the  profits  of  export  trade  will 
be  consmned  by  costs  of  operating  the  organization. 
Within  the  export  department  there  come  all  the  ques- 
tions which  confront  the  domestic  sales  department. 
There  is  a  question  of  departmentalization — shall  the 
work  of  the  export  department  be  divided  according  to 
market  areas  or  according  to  functions? 

The  relation  of  the  export  sales  organization  to  other 
departments  involves  many  questions.  The  necessity  of 
sales  research  and  market  research  in  export  depart- 
ments is  clearly  recognized;  whether  such  research  shall 
be  carried  on  by  the  general  research  department,  by  the 
research  department  of  the  domestic  sales  organization, 
or  by  a  special  department  remains  to  be  settled.  Like- 
wise, the  position  of  advertising.  Since  in  domestic  organ- 
izations, advertising  not  infrequently  is  on  a  par  with  the 
sales  department,  the  question  logically  arises  as  to  the 
relation  of  the  domestic  advertising  organization  to  ex- 
port advertising.  The  practice  of  companies  shows  the 
consolidation  of  export  and  domestic  advertising  in  one 
department  in  some  concerns  and  the  division  or  special- 
ization in  others.  As  for  export  credits,  the  argument 
is  frequently  raised  that  export  credit  problems  differ  so 
widely  from  domestic  credit  problems  that  a  separate 
department  must  be  formed  for  their  management.  The 
built-in  department  assumes  that  credit  problems  are 
essentially  alike  and  that  the  credit  department  should 
handle  both  domestic  and  foreign  credits.  In  the  sepa- 
rate credit  department  there  is  necessity  for  close 
cooperation.  Without  close  cooperation  of  credit  and 
selling  officials  in  the  export  department,  the  possibil- 
ities for  loss  in  export  trade  are  immensely  increased. 
With  proper  cooperation  and  proper  management,  the 
experience  of  many  concerns  has  demonstrated  that 
losses  in  export  credits  are  as  low  as  or  lower  than  those 
incuiTed  in  domestic  trade.    With  reference  to  the  finang- 


8       PROBLEMS   IN  EXPORT   SALES   MANAGEMENT 

iiig  of  export  sales,  the  export  manager  is  usually  con- 
cerned much  more  than  the  domestic  sales  manager  with 
financial  operations.  The  long  terms  upon  which  goods 
may  be  sold  and  the  delays  in  collection  necessitate  in 
many  cases  recourse  to  banking  operations  for  the  financ- 
ing of  export  sales.  For  these  the  export  manager  is  in 
many  cases  responsible  within  the  limits  set  by  the  admin- 
istrative authorities.  Export  packing  and  shipping  in- 
volve a  large  part  of  the  so-called  ''technique"  of  foreign 
trade;  and  in  the  past,  the  emphasis  that  has  been  laid 
upon  the  differences  between  foreign  and  domestic  trade 
have  related  in  no  small  measure  to  the  differences  in 
packing  and  shipping  requirements  for  delivery  beyond 
the  borders  of  the  United  States.  There  is  no  denying 
that  such  operations  are  considerably  more  complicated 
than  in  domestic  trade  or  that  domestic  arrangements 
have  become  so  familiar  that  specialized  knowledge  need 
not  be  acquired  for  their  utilization.  In  export  trade  the 
contrary  is  true.  The  difficulty  of  making  adjustments 
once  shipments  are  made  imposes  upon  the  export  execu- 
tive unusual  pressure  toward  care  in  all  matters  pertain- 
ing to  the  delivery  of  goods.  With  respect  to  export  pack- 
ing and  shipping  the  same  questions  regarding  the  rela- 
tion to  the  production  department  and  to  the  sales  depart- 
ment persist  as  in  domestic  organization. 

A  much  broader  question,  which  always  confronts  the 
concern  which  has  been  engaged  in  domestic  trade  when 
it  establishes  an  export  department,  relates  particularly 
to  the  relation  of  the  export  department  to  the  domestic 
sales  department.  From  the  viewpoint  of  the  writer  the 
export  department  is  concerned  with  selling  operations 
of  the  same  type  that  occupy  the  domestic  sales  de- 
partment. There  is  no  sufficient  reason  for  the  segre- 
gation of  the  two  departments,  except  size  t)f  concern, 
lack  of  capacity  and  knowledge  on  the  part  of  the 
higher  executives,  or  personal  reasons.  With  a  suffi- 
ciently broad-minded  general  sales  executive,  export  and 
domestic  sales  should  be  so  managed  as  to  bring  about 
better  results  as  a  whole  than  where  the  two  departments 
are  segregated.    Wherever  there  is  segregation  there  is 


FIELD  OF  EXPORT  MANAGEMENT        9 

very  clearly  the  necessity  for  careful  coordination  of 
activity.  The  fact  that  foreign  trade  may  be  looked  upon 
as  a  stabilizing  factor,  as  a  compensation  in  dull  domestic 
times  for  decrease  in  domestic  business,  brings  with  it 
also  the  danger  that  in  a  boom  market  in  the  domestic 
field  the  export  trade  v/ill  be  deprived  of  proper  supplies 
by  action  of  the  domestic  sales  department.  Long-run 
policy  necessitates  consideration  of  customers'  good-will 
in  the  foreign  field  in  precisely  the  same  degree  as  in  the 
domestic  field.  The  problems  of  relation  of  the  export 
department  to  the  production  department  are  always 
important  because  of  the  necessity  of  securing  prompt 
delivery  of  sufficient  quantities  of  product  sold,  but  they 
are  particularly  important  in  concerns  in  which  it  is 
necessary  to  make  changes  in  sizes,  models,  styles,  finish, 
and  containers  for  the  foreign  market.  While  the  export 
department  often  feels  that  it  should  be  able  to  control 
the  type  of  product  manufactured  for  export,  there  is 
clearly  the  necessity  for  compromising  between  the  sales 
attitude  which  would  comply  with  the  customer's  demand 
in  every  particular  and  the  manufacturing  point  of  view 
which  desires  standardization  and  efficient  production. 

The  export  sales  organization  extends  much  beyond 
the  home  office  or  the  plant  in  the  United  States.  Al- 
though many  houses  have  no  field  organization,  unless 
the  few  salesmen  may  be  termed  such,  there  are  other 
concerns  having  very  extensive  field  organizations  con- 
sisting in  some  cases  of  branch  houses  or  offices ;  in  other 
cases,  American  manufacturers  have  established  facto- 
ries in  foreign  countries.  Some  concerns  find  it  advisable 
to  establish  warehouses  and  stock-rooms  at  strategic 
points.  Such  establishments,  together  with  the  salesmen 
who  may  travel  from  these  points  as  headquarters,  con- 
stitute a  field  organization  the  organization  and  mainte- 
nance and  control  of  which  present  problems  of  consider- 
able magnitude.  The  ox{)ort  manager,  with  the  coopera- 
tion of  his  superiors,  must  first  of  all  decide  upon  the  con- 
ditions upon  which  it  is  advisable  to  establish  a  foreign 
factory  or  a  foreign  branch,    Foreign  taxes,  the  develop- 


10     PROBLEMS    IN   EXPORT   SALES    MANAGEMENT 

meiit  of  foreign  good-will,  lower  costs  of  production,  and 
taritfs  are  among  the  numerous  factors  which  may  in- 
fluence decision,  in  addition  to  internal  considerations 
affecting  the  general  policy  with  regard  to  tield  organi- 
zation. 

The  sales  manager  in  the  domestic  market  is  not  often 
confronted  by  the  cooperative  sales  organization  as  a 
substitute  or  supplement  to  his  own  sales  organization. 
Under  our  laws  certain  types  of  cooperative  or  combi- 
nation sales  agencies  are  forbidden  as  being  in  restraint 
of  trade.  In  export  trade,  on  the  contrary,  recent  enact- 
ment has  provided  for  such  coml)ination  organizations, 
whose  legal  forms,  requirements,  and  possibilities  are  of 
interest  to  the  export  fraternity  in  general.  Such  com- 
binations are  particularly  attractive  to  concerns  in 
highly  competitive  lines  or  to  smaller  concerns  finding  it 
impossible  to  build  up  an  export  organization  with  the 
volume  of  business  at  their  command. 

Business  executives  have  recognized  more  readily  the 
necessity  for  research  and  analysis  in  directing  export 
operations  than  for  domestic  operations,  primarily  be- 
cause they  have  not  assumed  that  they  knew  so  much 
concerning  foreign  operations.  However,  the  careful 
planning  in  accordance  with  the  information  which  can 
be  secured  for  export  trade  is  the  exception  rather  than 
the  rule,  just  as  careful  planning  of  domestic  sales  is 
exceptional.  The  research  methods  available  in  foreign 
trade  include  personal  investigation  of  particular  mar- 
kets and  particular  industries,  and  in  general  of  all  the 
points  upon  which  the  export  manager  wishes  to  be  in- 
formed in  order  to  conduct  business  intelligently.  For- 
eign trade  experts,  who  act  in  a  consulting  capacity, 
furnish  another  general  source  of  information  and  fund 
of  experience.  By  correspondence  and  questionnaires  it 
is  possible  of  course  to  secure  information  within  limita- 
tions of  such  methods.  Printed  and  current  sources  of 
information,  library  research,  furnish  by  far  the  greatest 
fund  of  fact  and  opinion  upon  which  the  export  executive 
may  draw,    The  printed  sources  of  information  incJudQ 


PlELD  OF   EXPORT  MANAGEMENT        li 

books,  periodicals,  pamphlets,  published  by  private  indi- 
viduals, authorities  and  alleged  authorities  upon  particu- 
lar subjects,  by  business  houses  as  part  of  general  ser- 
vice, and  particularly  by  the  government  through  the 
agencies  which  are  entrusted  with  the  functions  of  fur- 
nishing information  upon  trade  conditions  which  the  indi- 
vidual concern  is  not  in  a  position  to  gather  economically 
or  intelligently. 

The  research  activities  of  the  individual  business  en- 
terprise should  aim  at  securing  for  its  executives  in- 
formation which  will  be  necessary  and  useful  in  intelli- 
gent planning  and  operation.  Specifically,  the  export 
manager  wishes  to  be  informed  and  should  be  informed 
upon  the  suitability  of  his  products  to  the  particular 
markets  in  A\hich  it  is  proposed  that  they  be  sold,  their 
suitability  as  to  quahty,  their  durabihty  (particularly 
under  var^dng  climatic  conditioiis  and  with  respect  to  the 
service  for  which  they  are  intended),  their  style  (as  to 
conformity  with  national  custom),  their  uses  with  respect 
to  conditions  in  countries  different  from  our  oa\ii,  and 
the  reaction  of  dealers  and  consumers  toward  the  goods. 
Not  only  must  he  have  the  data  as  to  present  products, 
but  he  must  also  know  what  are  the  selling  points  and 
which  of  these  are  the  most  effective  appeals  for  particu- 
lar markets.  The  shipment  of  the  product  for  long  dis- 
tances under  conditions  which  are  entirely  different  from 
those  in  which  shipment  is  made  in  the  United  States 
requires  special  care  in  securing  facts  upon  which  to  base 
plans  for  containers  and  methods  of  delivery.  In  the 
second  place,  the  export  manager  should  be  informed 

upon  the  demand  for  his  product  in  foreign  countries 

the  actual  and  the  potential  demand.  In  determining 
such  demand  there  are  numerous  factors  which  are  of 
importance — the  purchasing  power  of  the  people,  their 
customs,  the  character  and  size  of  population.  Competi- 
tion in  international  trade  is  of  such  a  nature  that  no 
American  concern  has  a  proper  picture  of  the  market 
unless  he  knows  the  sort  of  competition  which  it  will 
meet.  Research  to  determine  the  character  and  force  of 
competition  is  therefore  an  essential  part  of  the  market 


12     PROBLEMS   IN   EXPORT  SALES   MANAGEMENT 

aiiah\sis.  In  the  third  place,  the  export  manager  must 
have  sufficient  data  on  hand  to  determine  not  only  his 
general  policy  concerning  channels  through  which  he 
shall  distribute  his  goods,  but  also  the  selection  of  con- 
cerns which  he  wishes  to  approach  as  agencies  or  as 
dealers  or  representatives  for  his  line  in  the  various 
parts  of  the  world.  Such  research  is  of  highest  im- 
portance and  the  data  w^liich  may  be  secured  upon  cus- 
tomers is  meager  enough.  Any  competent  export  man- 
ager will  vouch  for  the  fact  that  care  in  the  selection 
of  agents  and  agencies  is  a  wise  precaution  against  losses, 
which  have  been  all  too  frequent  in  the  past. 

The  data  furnished  by  research  activities  should  be 
used  not  only  in  making  decisions  from  time  to  time,  but 
also  in  planning  sales  operations  in  export  fields.  The 
necessity  for  planning  needs  no  comment.  The  distance 
from  buyers  in  ditferent  parts  of  the  world  increases  the 
need  for  careful  planning  of  all  parts  of  sales  operations, 
so  that  there  is  a  minimum  of  friction  and  of  adjustment. 
Long-run  plans  are  necessary  for  proper  development 
of  export  trade.  The  export  manager  must  expect  that 
in  the  ordinary  course  of  events  a  profitable  business  may 
not  be  built  up  for  a  number  of  years.  Connections  must 
be  made,  experiments  must  be  tried,  good-will  must  be 
built  up,  and  only  by  the  long-run  plan  can  any  company 
realize  fully  upon  its  initial  investment.  Long-run  plans 
should  not  be  inflexible,  however.  There  may  be  many 
unforeseen  things  necessitating  changes  in  the  plan,  but 
it  is  evident  that  companies  with  long-run  plans  will  not 
adopt  policies  which  will  bar  future  progress,  instances 
of  which  are  only  too  numerous  particularly  in  connec- 
tion with  long  contracts  with  exclusive  agencies.  The 
necessity  for  research  and  planning  involves  sometimes 
a  question  of  separation  of  planning  and  performance — 
a  question  of  organization  frequently,  because  it  is  often 
stated  that  the  research  and  planning  type  of  mind  is 
not  the  executive  type  of  mind  and  that  best  results  may 
be  secured  by  separating  the  planning  from  perform- 
ance, assigning  men  chosen  with  care  for  each  function. 


FIELD  OF  EXPORT  MANAGEMENT       13 

The  export  manager  must  be  a  plainiiiig  official,  sales 
and  operating  official,  but  lie  is  confronted  largely  with 
the  major  plans  or  the  master  plans  as  contrasted  with 
the  detail  planning,  which  in  some  export  departments 
is  carried  on  by  a  planning  division.  The  major  plan- 
ning involves  such  matters  as  the  determination  in  ad- 
vance of  time  of  sales  campaigns,  the  opening  of  new 
offices,  entrance  into  new  markets,  etc.  Detail  planning 
includes  planning  mth  reference  to  the  performance  or 
carrying  out  of  major  plans.  The  districting  of  sales 
territories  and  the  routing  of  export  sales  force  may  be 
logically  considered  a  phase  of  sales  planning.  It  is 
necessary  for  best  results  to  choose  such  sales  districts, 
when  the  world  is  the  field,  as  have  characteristics  in  com- 
mon and  which  can  best  be  worked  by  salesmen  of  partic- 
ular qualifications.  The  necessity  for  routing  the  sales 
force  needs  no  comment ;  much  detailed  data  and  knowl- 
edge are  needed.  Transportation  factors,  length  of  time 
needed  to  consummate  sales,  and  customs  of  particular 
countries  all  have  their  bearing  upon  the  routing  of  sales- 
men. For  control  purposes  a  definite  routing  and  careful 
reporting  are  absolutely  necessary.  From  another  point 
of  view,  planning  is  necessary  to  secure  the  best  results 
from  any  foreign  advertising  or  sales  promotion  work. 
Correlation  of  such  work  \vith  the  visits  of  the  salesman, 
proper  follow-up  of  direct  advertising,,  proper  handling 
of  sampling,  and  careful  timing  of  sales  efforts  are  in- 
volved in  the  planning  which  increases  the  results  of  the 
sales  methods  chosen. 

With  the  nucleus  of  an  organization  and  a  basis  of 
fact,  the  export  manager  or  other  export  executives  are 
in  a  position  to  determine  at  least  tentatively  such  export 
sales  policies  as  have  not  already  been  determined  by  the 
administration.  The  necessity  for  definite  export  to  pre- 
vent vacillation,  to  bring  about  uniformity  of  treatment 
of  customers,  and  to  avoid  the  need  of  decision  upon  re- 
curring sets  of  circumstances  are  obvious.  The  results 
of  absence  of  policy  are  equally  obvious  and  have  been 
all  too  frequently  illustrated  in  the  experience  of  Ameri- 


14     PROBLEMS  IN  EXPORT   SALES  MANAGEMENT 

can  exporters.  The  variety  of  matters  upon  which  policy 
should  be  formulated  may  be  grouped  under  five  head- 
ings :  first,  those  policies  which  relate  to  the  product ; 
secondly,  those  policies  which  relate  to  channels  of  distri- 
bution; thirdly,  price  policies;  fourthly,  credit  policies; 
and,  lastly,  the  general  policies  toward  customers. 

Export  policies  are  determined  in  part  by  administra- 
tive officials,  in  part  by  the  export  executives.  The 
financial  circumstances  of  the  concern  and  its  type  of 
product  will  sometimes  lead  inevitably  to  certain  policies. 
On  the  other  hand,  in  most  matters  there  is  a  considerable 
range  of  choice,  and  particularly  in  separate  export  de- 
partments the  export  manager  is  given  much  liberty  in 
the  determination  of  policies  to  be  put  into  force.  As  in 
domestic  trade,  it  is  important  that  the  policy  should  be 
carefully  chosen  and  as  carefully  put  into  operation.  A 
good  policy  badly  executed  may  be  worse  than  no  policy 
at  all.  With  regard  to  the  product,  the  first  question  of 
policy  and  one  which  confronts  many  concerns  in  the  ex- 
port trade  is  the  general  policy  regarding  the  shaping  of 
the  i)roduct  to  foreign  demand.  The  policy  of  German 
manufacturers  in  meeting  foreign  whims,  no  matter  what 
their  importance  and  no  matter  how  absurd,  is  to  be  con- 
trasted with  the  policy  of  manufacturers  in  other  na- 
tions who  all  too  frequently  attempt  to  force  upon  foreign 
buyers  (with  indifferent  success)  the  products  which  do 
not  meet  their  requirements.  There  are  conspicuous  ex- 
amples of  success  among  firms  which  have  adopted  the 
policy  of  making*  no  variation  in  their  products  for  for- 
eign demand.  It  is  evident  that  no  definite  rule  can  be 
laid  down  and  that  the  policy  must  be  determined  by  each 
company,  but  it  is  just  as  evident  that  careless  disregard 
of  the  real  demands  of  consumers,  whether  in  foreign 
countries  or  in  the  domestic  markets,  will  lead  to  smaller 
sale  and  be  disastrous  to  the  manufacturer  in  the  long 
run. 

Another  jjolicy,  that  regarding  the  (piality  of  goods,  is 
one  of  particular  importance  to  many  manufacturers  be- 
cause of  the  widespread  opinion  that  policy  of  quality 


FIELD  OF  EXPORT  MANAGEMENT       15 

was  unnecessary  in  foreign  transactions.    Carelessness  in 
filling  orders,  the  dumping  of  seconds  upon  foreign  cus- 
tomers by  concerns  which  would  think  of  no  such  thing 
in  the  domestic  market,  is  too  well  known  to  require  com- 
ment.   It  was  a  mistaken  policy.    Styles  and  models  for 
foreign  trade  require  particular  consideration.    The  con- 
cern whose  product  is  affected  by  the  style  element  must 
very  soon  adopt  a  policy  and  a  definite  means  of  carrying 
it  out.    Standardization  and  simplification  as  production 
policies  will  frequently  encounter  the  opposition  of  for- 
eign demand  for  variation  from  standardized  styles  of 
products.    The  foreign  sales  department  must  therefore 
strike  a  compromise  which  will  bring  about  the  greatest 
net  results  and  the  most  profitable  long-run  development. 
As  in  domestic  trade,  the  guarantees  of  product  (either 
implied  or  expressed),  guarantees  of  quahty  or  quantity 
present  their  problems  to  the  sales  manager-  likewise,  the 
service  required  for  articles  of  a  more  or  less  mechanical 
and  complex  nature.     The  specialty  manufacturer  and 
the  manufacturer  of  branded  staples  must  concern  him- 
self very  soon  in  the  development  of  his  foreign  trade 
with  trade-mark  and  brand  policy.     He  must  determine 
whether  he  will  use  brands  and  trade-marks  in  foreign 
trade,  whether  the  brands  and  trade-marks  to  be  used  are 
to  be  the  same  as  in  domestic  trade  or  are  to  be  varied 
according  to  markets.     The  manufacturer  must  decide 
whether  he  will  make  private  brands  for  foreign  buyers, 
whether  he  will  register  his  trade-mark  in  all  cases  to 
prevent  pirating,  a  practice  which  is  by  no  means  uncom- 
mon.    Some  of  the  same  questions  come  up  regarding 
patents.     Shall  the   manufacturer  adopt  the  poHcy  of 
registering  his  patents  in  all  cases  or  not? 

Among  the  most  difficult  questions  which  the  export 
executive  must  settle  are  policies  conperning  channels  of 
distribution.  In  many  cases,  the  nature  and  size  of  the 
export  organization  will  depend  upon  the  policies  adopted 
and  the  adoption  of  such  policies  becomes  a  matter  for 
administrative  action,  an  early  requirement  in  the  con- 


16     PROBLEMS  IN   EXPORT  SALES   MANAGEMENT 

duct  of  export  business.  There  is,  first  of  all,  the  neces- 
sity of  determining  the  choice  of  policy  as  between  in- 
direct and  direct  exporting;  that  is,  between  the  policy 
which  would  turn  a  large  part  of  the  marketing  function 
including  selling  over  to  independent  middlemen,  as  con- 
trasted to  the  policy  whereby  the  concern  carries  on  trans- 
actions directly  with  foreign  buyers  of  one  class  or  an- 
other. However,  more  frequently  than  not,  the  concern 
which  sets  up  an  export  department  to  initiate  and  exe- 
cute transactions  with  foreign  buyers  will  determine  its 
policy  with  reference  to  particular  markets  rather  than  a 
general  policy  which  would  recpiire  direct  export  to  all 
parts  of  the  world  irrespective  of  their  characteristics. 
Conseciuently,  we  find  that  manufacturers  may  sell 
through  export  merchants  or  through  export  commission 
houses  at  the  same  time  that  they  are  selling  direct  to 
buyers  in  other  markets.  It  need  not  be  repeated  that 
the  general  considerations  affecting  determination  of 
distribution  policy  are  much  the  same  in  foreign  as  in 
domestic  trade.  Adherence  to  the  polic}^  of  indirect  ex- 
port involves  smaller  financial  responsibility,  smaller 
risk,  but  also  looser  connection  with  markets  and  less 
aggressive  selling  of  particular  products.  Likewise  in 
selling  to  dealers  in  foreign  countries,  problems  of  policy 
arise.  The  difficulties  which  develop  in  selling  to  two 
or  more  classes  of  dealers,  one  of  which  is  accustomed 
to  purchase  from  the  other,  have  their  counterpart  in 
domestic  trade.  The  exclusive  agency  policy  presents 
more  difficult  problems,  because  the  factors  of  distance, 
insufficient  knowledge  concerning  agents,  and  looseness 
of  control  bring  it  about  that  satisfactory  relationships 
with  exclusive  agencies  are  attained  only  as  the  result  of 
utmost  care  and  consideration  in  both  selection  and  han- 
dling of  agents  whenever  the  policy  is  adopted.  The 
peculiar  dangers  in  exclusive  agencies,  due  to  competi- 
tion of  natives  of  other  countries,  have  been  pointed  out 
very  recently  by  the  Bureau  of  Foreign  and  Domestic 
Commerce.  Aggressive  selling  policy  in  foreign  trade 
must  include  aggressive  policies  and  methods  assisting 


FIELD  OF  EXPORT  MANAGEMENT        17 

the  dealer  to  deal  profitably  in  a  manufacturer's  line. 
The  manufacturer  nmst  therefore  determine  whether  he 
will  cooperate  with  distributors  and  whether  in  his  par- 
ticular line  such  policy  of  cooperation  is  necessary. 
Where  the  policy  of  establishing  branch  houses  has  been 
adopted,  organization  questions  arise  and  questions  of 
general  i:)olicy  regarding  relations  between  branch  house 
and  headquarters. 

Amoxg  export  traders  there  seems  to  be  less  miscon- 
ception as  to  the  imi)ortance  of  price  policies  than  char- 
acterizes domestic  commerce.  The  export  manager  must 
determine,  first  of  all,  his  policy  as  to  price  levels.  Shall 
foreign  price  levels  be  lower  or  higher  than  domestic 
levels!  For  certain  types  of  goods,  international  com- 
petition will  determine  the  maximum  price  which  can 
be  obtained.  For  other  types  of  goods,  the  manufacturer 
will  enjoy  a  certain  monopoly  and  mil  fix  his  prices  with 
reference  to  the  extent  of  demand,  his  own  costs,  and 
other  factors.  The  policies  of  concerns  regarding  quo- 
tation of  prices  may  work  favorably  for  or  militate 
against  the  success  of  the  export  department.  Under 
present  conditions  there  is  always  the  problem  of  policy 
to  be  determined  with  regard  to  quotation  in  foreign 
currency,  as  contrasted  with  quotation  in  dollars ;  further- 
more, the  quotation  of  delivered  prices,  prices  f .  o.  b.  port, 
prices  including  invoice  cost,  insurance,  freight  or  vari- 
ations. The  general  desires  of  customers  and  the  tradi- 
tions of  particular  trades  will  be  very  large  factors  in 
determining  the  policy  of  an  export  department.  The 
question  of  quoting  the  net  price,  rather  than  the  list 
price,  with  the  correlative  question  of  trade  discounts 
must  likemse  be  solved.  Ticklish  questions  of  policy  are 
involved  in  establishing  a  relationship  between  the  prices 
to  be  quoted  to  jobbers,  to  retailers,  to  so-called  "im- 
porters," and  to  consumers.  Not  only  must  the  relation- 
ship be  established,  but  a  policy  must  be  established  with 
regard  to  uniformity  of  prices  within  each  class.  Shall 
variation  in  price  be  made  for  greater  credit  risk  f    Shall 


18     PROBLEMS  IN   EXPORT   SALES  MANAGEMENT 

prices  be  shaded  for  one  and  increased  somewhat  for 
another  under  certain  conditions,  even  though  both  con- 
cerns are  engaged  in  the  same  type  of  business  and  sell- 
ing to  the  same  type  of  purchaser?  The  quantity  dis- 
count presents  the  same  problem  as  in  domestic  trade, 
though  the  acuteness  of  the  objections  of  some  classes  of 
trade  to  quantity  discounts  has  not  as  yet  appeared  in 
foreign  trade.  Maintenance  of  resale  prices  in  foreign 
trade  becomes  of  course  a  matter  of  agreement  between 
dealers  and  export  department.  Price-cutting  in  related 
markets  may  have  disturbing  effects;  it  seems  to  be  no 
more  possible  to  enforce  maintenance  of  resale  prices  in 
foreign  than  in  domestic  trade.  More  important  are 
guarantees  against  price  decline,  the  period  elapsing  be- 
tween order  and  shipment  and  between  shipment  and 
sale  to  consumer  being  of  such  length  that  guarantees 
possess  peculiar  dangers  wherever  they  are  given. 

The  customs  of  competing  nations,  the  needs  of  partic- 
ular markets,  the  financial  circumstances  and  policies 
of  the  individual  concern  must  be  reconciled  in  deter- 
mining the  credit  policy  in  foreign  trade.  Credit  losses 
in  foreign  trade,  when  well  managed,  are  no  greater  and 
some  concerns  show  smaller  losses  than  in  domestic 
trade ;  but  there  is  much  muddled  thinking  upon  the  whole 
matter  of  credit  policy.  During  the  past  few  years,  cred- 
its have  been  closely  bound  up  with  policies  regarding 
returned  and  rejected  goods,  cancellations  of  orders,  and 
claims  and  allowances.  While  each  case  will  be  judged 
to  some  extent  upon  its  merits,  the  export  manager  fre- 
quently finds  it  advisable  to  determine  upon  a  policy 
which  will  apply  to  the  majority  of  cases. 

Given  a  sales  organization,  the  information  necessary 
to  operate  it  having  determined  policies,  the  problems 
remaining  in  export  sales  management  deal  primarily 
with  the  conduct  of  sales  operations  by  the  organization 
in  accordance  with  information  previously  gathered  and 
policies  previously  determined  or  determined  as  occasion 
arises.    The  selling  process  in  export  trade  includes  the 


FIELD  OF  EXPORT  MANAGEMENT       19 

same  steps  as  the  selling  process  in  domestic  trade,  but 
the  selling  process  wherever  it  is  performed  must  take 
account  of  the  buyer;  and  in  foreign  trade  the  buyer 
presents  many  variations  from  the  types  mth  which  the 
sales  manager  is  familiar  in  the  domestic  market. 
Furthermore,  in  the  conduct  of  sales  operations,  in  sell- 
ing in  accordance  mth  policies  of  the  firm,  foreign  buyers 
are  not  to  be  grouped  together.  It  is  evident  that  Far 
Eastern  will  differ  from  South  American  buyers,  just 
as  domestic  differ  from  Australian  buyers.  The  methods 
utilizing  various  means  of  selling  therefore  must  be 
chosen  according  to  the  characteristics  of  classes  of 
buyers,  and  successful  methods  in  the  domestic  market 
may  or  may  not  be  successful  in  foreign  markets. 
However,  the  means  of  selling  at  the  disposal  of  the  ex- 
port sales  executive — personal  solicitation,  advertising  in 
its  numerous  forms,  samples,  correspondence,  investment 
— are  essentially  the  same  as  in  the  domestic  market,  but 
personal  solicitation  must  be  adapted  to  the  market  in 
which  it  is  used.  Advertising  to  be  effective  must  be 
adapted  to  the  classes  to  which  appeal  is  to  be  made. 
The  tone,  makeup,  and  style  of  correspondence  must  be 
varied  according  to  the  market.  While  for  raw  materials 
of  certain  types  exchanges  exist,  just  as  for  cotton  in 
this  country,  and  while  for  other  types  of  products  there 
are  auctions,  competitive  bidding,  and  government 
offerings,  yet  these  are  but  variations  of  the  general 
means  of  selling  mentioned  above.  The  forms  of  adver- 
tising used  in  foreign  trade  are  as  numerous  and  varied 
as  those  employed  in  domestic  trade.  The  uses  of  adver- 
tising as  a  means  of  creating  consumer  demand  or  con- 
sumer acceptance,  as  a  means  of  creating  good-mil  among 
prospective  dealers,  require  careful  study  of  foreigii 
markets.  The  choice  of  medium,  the  size  of  the  advertis- 
ing appropriation,  the  language  in  which  the  advertise- 
ment is  to  be  written,  and  the  preparation  of  copj^  are 
problems  which  require  careful  study  of  a  nature  which 
is  too  seldom  exhibited. 

The  forms  of  personal  solicitation  are  of  much  the 
same  character  as  those  used  in  domestic  trade — regular 


20     PROBLEMS   IN   EXPORT   SALES  MANAGEMENT 

salesmen,  combination  salesmen  carrying  the  lines  of 
two  or  more  manufacturers,  demonstration  salesmen, 
agency  inspectors,  and  missionary  salesmen  performing 
the  selling  function  in  one  way  or  another,  either  working 
for  the  purpose  of  securing  immediate  orders  and  laying 
the  foundation  for  future  orders  or  for  one  of  the  two 
purposes.  In  the  management  of  salesmen,  questions  of 
selection,  training,  and  compensation  are  no  nearer  solu- 
tion than  in  domestic  fields,  while  supervision  and  control 
are  even  more  difficult.  The  distance  factor  and  difficulty 
of  communication  lend  especial  importance  to  correspon- 
dence and  direct-mail  methods.  As  in  advertising,  extreme 
care  is  necessary  to  avoid  waste.  The  use  of  samples  in 
developing  export  trade  is  in  many  lines  practically  uni- 
versal. The  prevailing  custom  has  given  rise  to  abuses 
and  to  problems  which  the  export  manager  must  work 
out  carefully.  The  export  executive  is  therefore  con- 
fronted, first  of  all,  with  the  problem  of  selecting  the 
means  which  he  shall  use  in  taking  orders  of  his  goods; 
secondly,  of  selecting  such  other  means  as  may  be  advis- 
able to  build  up  good- will  and  foundation  for  future  sales ; 
third,  he  must  so  correlate  the  various  means  which  he 
uses  as  to  secure  maximum  results  A\dth  the  minimum  of 
effort. 

ParticujjAR  importance  attaches  in  export  sales  man- 
agement to  problems  of  financing  and  delivery,  for 
it  is  here  that  many  of  the  technical  phases  of 
foreign  trade  are  found  which  lend  so  much  of  the  air 
of  mystery  to  the  novice.  In  the  export  credit  depart- 
ment there  must  be  devised  a  system  :iPor  collecting  such 
credit  information  as  can  be  secured  upon  applicants  for 
credit  and  for  passing  intelligently  upon  such  applica- 
tions in  the  light  of  this  information.  Since  the  terms 
upon  w^hich  credit  is  granted  are  frequently  much  longer 
than  in  domestic  trade,  since  purchases  are  in  larger 
amounts,  and  since  at  best  funds  are  tied  up  in  export 
orders  for  a  considerable  length  of  time,  many  concerns 
find  it  necessary  to  avail  themselves  of  banking  facihties 
in  order  to  carry  on  a  larger  business  than  their  active 


FIELD  OF  EXPORT  MANAGEMENT       21 

working  capital  will  allow.  The  financial  requirements 
for  conducting  the  export  business  will  depend  upon  the 
terms  of  credit  offered,  the  volume  of  trade,  character  of 
competition,  and  general  business  conditions.  The  ser- 
vices of  the  l)anker  and  the  exporter  in  financing  imports 
consist  sometimes  of  collection  of  drafts,  sometimes  dis- 
counting drafts,  in  other  cases  advancing  upon  drafts. 
The  services  of  banks  may  not  stop  here.  In  their  work 
of  collection,  in  their  desire  to  increase  the  amount  of 
their  business,  they  may  carry  on  many  collateral  services 
of  considerable  importance  to  the  individual  exporter. 
The  export  manager,  however,  must  be  informed  as  to  the 
varying  degrees  of  security  which  he  may  be  able  to 
obtain  by  means  of  the  many  variations  in  terms  current 
in  foreign  export  and  import  transactions.  These  run 
the  gamut  from  cash  in  advance  to  open  account,  through 
cash  against  documents  at  port,  cash  against  documents 
at  point  of  destination,  etc. 

Likewise,  in  the  handling  of  the  export  order  and  in  the 
operations  connected  with  its  delivery,  special  technical 
information  is  necessary.  The  policy  with  regard  to 
making  quotations  has  been  mentioned  above.  The  vari- 
ous methods  of  making  quotations  in  foreign  currency, 
such  as  figuring  c.  i.  f.  quotations  and  the  use  of  cables 
in  making  quotations,  offer  problems  in  many  cases  of  a 
complex  nature.  The  export  order  in  its  various  forms, 
its  characteristics,  its  treatment  in  acknowledgment  and 
interpretation  will  in  the  smoothly  running  organization 
require  little  attention  from  the  export  executive.  In  the 
packing  of  goods  for  export,  the  determination  of  size 
and  character  of  containers  must  be  made  ui)on  the  basis 
of  a  variety  of  factors  which  do  not  apparently  enter 
into  the  solution  of  such  problems  in  domestic  trade. 
The  invoicing  of  goods  to  foreign  buyers,  its  character- 
istics, the  order  system,  the  methods  of  shipment,  the 
documentation  of  shipment,  the  details  of  compliance 
vdih  foreign  regulations,  marine  insurance,  and  the  like 
present  the  appearance  of  extreme  complexity  to  the 
beginner,  and  even  in  experienced  organizations  require 


22     PROBLEMS   IN   EXPORT  SALES   MANAGEMENT 

care  to  avoid  costly  error.  However  much  stress  we  may 
lay  upon  accuracy  in  such  matters,  the  knowledge  of  the 
technique  of  foreign  trade  is  never  more  than  a  knowl- 
edge of  details.  As  such,  it  should  be  accorded  its  proper 
place  as  essential  for  the  smooth  operation  of  an  organ- 
ization ;  it  should  not  be  regarded  as  a  substitute  for  or 
as  a  proper  basis  for  business  judgment.  The  knowledge 
of  commercial  and  shipping  documents  no  more  makes  a 
man  an  export  executive  than  the  technical  knowledge 
possessed  by  a  billing  or  shipping  clerk  in  a  domestic 
concern  makes  a  domestic  executive. 

In  accordance  with  our  conviction  that  the  executive 
viewpoint  can  best  be  developed  by  a  study  of  the  prob- 
lems met  in  business,  the  following  sections  present  a 
series  of  cases  based  upon  the  experience  of  concerns  en- 
gaged in  export  trade.    Problems  are  grouped  as  follows : 

PROBLEMS  IN  EXPORT  ORGANIZATION. 

RESEARCH  AND  PLANNING  IN  EXPORT  TRADE. 

EXPORT    POLICIES POLICIES    RELATING    TO 

PRODUCT. 

EXPORT    POLICIES POLICIES    RELATING    TO 

DISTRIBUTION. 

EXPORT    POLICIES POLICIES    RELATING    TO 

PRICES  AND  TERMS  OF  SALE. 

SALES  METHODS. 

MANAGEMENT  OF  EXPORT  SALES  FORCE. 

FOREIGN   BRANCHES. 

FINANCING,   CREDITS  AND  COLLECTIONS. 
CHAPTER      XI.    DELIVERY   OF   EXPORT   ORDERS. 
CHAPTER    XII.    A.    CONTROL  OF   EXPORT  SALES. 

B.    GENERAL  PROBLEMS. 

Although  the  effort  is  made  to  give  a  certain  amount 
of  background  in  each  problem,  supplementary  readings 
will  l)e  found  helpful.  These  are  indicated  in  the  frequent 
bibliographical  references  in  the  footnotes. 


CHAPTER 

IL 

CHAPTER 

in. 

CHAPTER 

IV, 

CHAPTER 

V, 

CHAPTER 

VI, 

CHAPTER 

VII, 

CHAPTER  VIII, 

CHAPTER 

IX. 

CHAPTER 

X, 

CHAPTER  II 


EXPORT  SALES  ORGANIZATION 

ORGANIZATION  for  selling  in  foreign  markets  pre- 
sents precisely  the  same  problems  to  the  executive 
as  organizing  for  the  home  market.  The  organiza- 
tion must  be  of  such  size  and  character  as  to  perform 
efficiently  the  work  required  of  it  and  yet  not  so  large  that 
the  efforts  of  each  member  of  the  organization  are  not 
reasonably  occupied  in  doing  those  things  for  which  he 
is  best  fitted.  The  organization  must  possess  a  degree  of 
flexibility  to  enable  it  to  meet  without  disruption  not  only 
the  day-to-day  variations  in  the  volume  of  work  to  be 
done  but  also  the  periodic  and  cyclical  variations  in  the 
volume  of  business  to  be  transacted.  It  is  obvious  that 
the  export  organization  will  vary  with  the  extent  and 
nature  of  the  functions  to  be  performed.  It  is  equally 
clear  that  the  extent  and  nature  of  functions  to  be  per- 
formed will  depend  in  part  upon  the  portion  of  work 
performed  by  agencies  outside  the  business  organization. 
Every  exporter  must  therefore  be  familiar  with  the  ex- 
ternal organization  of  foreign  trade,  learn  the  possibil- 
ities of  shifting  in  part  some  of  the  marketing  functions 
to  the  specialized  agencies  which  exist  for  that  purpose.* 

*Descriptions  of  the  external  orgauization  of  foreign  trade  are  to  be 
found  in  the  general  ■works  upon  foreign  trade,  particularly  those  of  Euro- 
pean origin.  The  description  in  Dr.  Joseph  Hellauer's  Welthandelslehre, 
paragraphs  30-79,  is  undoubtedly  the  most  complete.  The  description  in 
The  Theory  and  Practice  of  International  Trade  by  A.  J.  Wolfe,  Chaps. 
III-IX,  resembles  this  very  closely.  More  recent  and  more  readable  is 
J.  Anton  De  Haas's,  The  Organisation  of  Foreign  Trade,  q.v.  Chapters 
VIII  and  IX  of  B.  Olney  Hough's  Practical  Exporting,  contain  supple- 
mentary information.  See  also  Einaigl,  Eandhuch  der  Export  Praxis, 
page  1;  Clerget,  Manuel  D 'Economic  Commercialc,  pages  115,  391;  Dude- 
ney,  Exporters'  Handbook  and  Glossary,  Chapters  II,  IV-IX  and  XIII, 

23 


24     PROBLEMS   IN   EXPORT  SALES  MANAGEMENT 

The  commercial  organization  for  international  distri- 
bution of  goods  consists  of  middlemen,  facilitative 
agencies  of  various  types,  in  institutions  all  of  which  in 
their  present  form  are  the  results  of  centuries  of  devel- 
opment.* Their  progress  may  be  traced  step  by  step 
from  ancient  and  mediaeval  times  when  international 
merchants  performed  for  themselves  all  the  operations 
incident  to  the  marketing  of  goods  up  to  the  present  time 
when  a  complex  organization  may  stand  between  the 
merchant  or  manufacturer  and  the  ultimate  consumer,  an 
organization  necessitated  by  the  enormous  increase  in 
the  volume  of  trade,  the  number  of  articles  which  enter 
into  the  international  commerce,  and  the  development  of 
more  distant  markets.  Yet  with  the  exception  of  those 
agencies  designed  to  meet  requirements  of  laws  placing 
restrictions  upon  freedom  of  international  commerce, 
each  factor  in  the  international  organization  finds  its 
counterpart  in  the  domestic  market. 

Any  system  of  distribution  has  as  its  objective  supply- 
ing immediate  or  intermediate  consumers  with  goods.  It 
is  the  consumer  who,  over  any  considerable  period  of 
time,  determines  the  character  of  the  goods  which  will  be 
produced.  Taking  into  consideration  factors  of  environ- 
ment and  customs,  the  foreign  consumer's  influence  upon 
distribution  and  methods  of  manufacture  differs  little 

*Hooper  and  Graham,  on  page  7  of  their  Import  and  Export  Trade  give 
the  following  classification: 

"The  persons  engaged  in  tr;ide  may  be  ronghly  classified  into 
Producers,   Distributors,   Intermediaries,    and   Auxiliaries. 

r  Growers  of  tea,  cotton,  wheat,  wool,  etc. 
Producers  J.  Manufacturers   of  goods. 

[  Makers  of  machinery,  etc. 

{Merchants. 
Warehousemen    (another   name   for   nier- 
chants). 
Eetail  tradesmen. 

(Agents  or   factors. 
Brokers   (bill,  exchange,  ship,  insurance, 
wool,  corn,  etc.). 

(Bankers. 
Railway  companies. 
Shipowners,  etc." 


EXPORT  SALES  ORGANIZATION  25 

from  that  of  the  domestic  consumer.  Any  sound  market- 
ing policy  will  start  with  a  study  of  the  consumer. 

As  in  the  United  States,  for  many  types  of  manufac- 
tured goods  the  retailer  stands  closest  to  the  consumer, 
purchasing  in  lots  of  size  for  resale  in  small  units.  The 
retailer  exists  in  foreign  countries,  and  examples  of  all 
the  types  found  in  the  United  States  may  also  be  found 
in  foreign  countries.  The  department  store  is  found  in 
South  America,  China,  England,  France,  and  other 
countries  as  well  as  in  the  United  States.  The  chain 
store  is  prominent  in  many  European  countries.  Spe- 
cialty stores  are  not  lacking  in  all  the  larger  cities 
throughout  the  world.  Retail  hardware,  grocery, 
jewelry,  and  dry  goods  stores  exist  abroad  as  well  as 
here.  In  many  of  the  less  developed  sections  of  the  world 
the  most  common  type  of  retailer  is  to  be  compared  to 
the  general  store,  which  still  exists  in  some  parts  of  the 
United  States  in  the  less  thickly  settled  communities  and 
which  has  played  a  large  part  in  the  merchandising  de- 
velopment of  the  countr3\  The  relationships  between  the 
various  types  of  stores  and  the  attitude  of  unit  stores  to 
department  stores  are  much  the  same  as  in  this  countr3\ 

While  the  largest  retailers  purchase  from  the  manu- 
facturers and  sometimes  from  general  importers  and 
import  on  a  considerable  scale  on  their  own  account, 
smaller  retailers  as  in  the  United  States  depend  in  many 
staple  lines  upon  the  jobbers  or  wholesalers  who  are  in 
most  cases  importers.  While  some  of  the  general  im- 
X3orters  in  certain  countries  sell  only  to  wholesalers,  it  is 
more  common  for  general  importers  to  be  likewise  whole- 
salers selling  to  retailers.  In  not  a  few  cases  the  whole- 
salers also  have  retail  establishments;  this  combination 
brings  with  it  certain  important  problems  in  connection 
with  agency  representation  for  American  manufacturers. 
The  importer  in  the  foreign  country,  whether  he  be  a 
large  retailer,  a  wholesaler,  or  a  general  importer,  may 
purchase  his  goods  from  either  a  middleman  or  a  manu- 
facturer in  the  United  States.  This  middleman  may  be  an 
export  commission  house  located  in  one  of  our  ports  or 


26     PROBLEMS   IN  EXPORT  SALES   MANAGEMENT 

an  export  mercliaiit.  He  may  be  a  manufacturer's  agent 
selling  tlie  products  of  a  selected  group  of  manufac- 
turers for  whom  he  has  export  representation.  A  fourth 
form  is  the  cooperative  selling  agency,  possibly  one 
formed  under  the  "Webb-Pomerene  Law. 

Eeversing  the  point  of  view,  we  see  that  the  exporting 
manufacturer  may  sell  through  middlemen  located  in  this 
country,  to  a  middleman  located  in  the  foreign  country 
(factor,  general  importer,  broker,  wholesaler,  or  re- 
tailer), or  he  may  sell  to  the  consumer.  The  chain  of 
distribution  utilized  by  the  individual  manufacturer  will 
be  determined  partly  by  the  customs  of  the  particular 
market  and  partly  by  the  policy  of  the  manufacturer. 
While  manufacturer-to-consumer  may  be  the  most  direct 
method  of  distribution,  the  distribution  of  large  volumes 
of  product  in  this  way  requires  the  most  complex  organ- 
ization from  the  view-point  of  the  manufacturer. 

The  international  trade  organization  for  raw  materials 
differs  somewhat  from  that  for  manufactured  products, 
just  as  the  domestic  market  organization  for  raw  cotton 
or  grain  differs  from  that  for  the  domestic  distribution 
of  manufactured  products.  Upon  the  commodity  ex- 
changes of  Europe  are  sold  American  cotton  and  Ameri- 
can grain  for  the  account  of  American  exporters.  Brokers 
and  commission  men  perform  the  same  functions  for 
dealers  as  in  purely  domestic  transactions.  The  prob- 
lem of  selling  staple  raw  materials  becomes  ordinarily  a 
matter  of  price  adjustments  to  demand  and  supply  fac- 
tors and  the  problem  of  physical  distribution.  The  func- 
tions to  be  x^erformed  are  the  same  as  with  manufactured 
products,  but  the  emphasis  upon  particular  functions  dif- 
fers greatly  because  of  the  existing  demand  for  the  com- 
modity which  makes  it  a  staple. 

In  the  foreign  trade  organization  there  are  also  many 
facilitative  or  auxiliary  institutions  and  persons,  each 
assuming  a  part  of  the  marketing  functions  connected 
with  the  distribution  of  a  product.    In  risk-taking  there 


EXPORT  SALES  ORGANIZATION  27 

are  tlie  insurance  companies  and  the  agencies  for  the 
purchase  and  sale  of  insurance — insurance  agents,  in- 
surance brokers,  and  the  like.    In  the  financing  of  sales, 
banking  institutions   of  various   sorts,   institutions   for 
collecting  and  disseminating  credit  information,  institu- 
tions for  the  guarantee  of  foreign  credits,  and  such  spe- 
cial agents  as  compradors  all  assist  in  the  extension  of 
credit  in  international  trade.    In  the  delivery  of  goods, 
in  addition  to  the  transportation  companies   (rail  and 
water),   there   are   freight   forwarders,    steamship   and 
freight  brokers,  customs  brokers,  inspectors,  and  others. 
For  the  storage  of  goods  there  are  provided  general 
warehouses  and  warehouses  of  special  types  as  well  as 
bonded  warehouses.    Without  going  into  the  functions  of 
all  of  these  factors  in  foreign  trade  organization,  one  will 
quickly  draw  the  conclusion  that  the  internal  organization 
of  a  foreign  trade  department  will  depend  in  no  small 
measure  upon  the  decisions  of  executives  with  regard  to 
the  utiHzation  of  the  various  available  factors.     It  is 
evident  that  a  concern  which  sells  to  export  commission 
houses   exclusively  needs   but  a   small  organization  as 
compared  to  the  concern  which  sells  through  its  own 
branches  direct  to  retailers  in  many  parts  of  the  world. 
It  is  evident  that  the  organization  of  a  concern  which  uses 
freight  forwarders  for  the  actual  shipment  of  goods  ^^dll 
differ  m  some  respects  from  the  organization  of  a  concern 
which  handles  all  the  details  of  shipment.    Job  analysis 
of  an  export  department  would  show  therefore  not  only 
what  duties  were  performed  by  each  member  but  also 
the  functions  performed  by  the  department  as  a  whole 
and  the  functions  which  were  shifted  to  the  specialized 
agencies. 

The  following  outline  and  questions  dealing  ^dth  the 
organization  of  the  export  sales  departments  in  individ- 
ual concerns  indicate  that  the  types  of  organization  prob- 
lems with  which  the  export  sales  executive  has  to  deal 
are  very  similar  to  those  confronting  the  manager  of 
domestic  sales. 


28     PROBLEMS   IN  EXPORT  SALES   MANAGEMENT 

A.  Location  op  Export  Department. 

1.  Inland  location  at  plant  versus  port  location;  splitting  be- 
tween plant  and  port. 

Where  shall  the  export  department  be  located — at  the 
plant  or  at  the  seaport? 

Which  seaport  otters  greatest  advantages? 

What  are  the  advantages  and  disadvantages  of  seaboard 
location?  Of  location  at  inland  plant?  To  what  extent 
will  decision  upon  location  depend  upon  tj^pe  of  product 
to  be  sold  and  customs  of  buyers  ? 

When  decision  has  been  made  to  locate  at  port,  how  ex- 
tensive need  the  organization  at  the  plant  be? 

2.  Location  of  branches. 

If  it  is  found  advisable  to  establish  branch  offices,  where 
should  they  be  located  ? 

What  considerations  should  determine  the  choice  of 
location  ? 

3.  Location  of  warehouses. 

Where  should  Avarehouses  be  located  if  separate  from 
branches  ? 

Is  it  advisable  to  use  public  warehousing  facilities,  lease 
warehouse  buildings  or  portions  of  buildings,  or  build 
warehouse  facilities  particularly  for  the  use  of  the 
concern  ? 

B.  Organization  of  Personnel. 

1.  Types  of  organization — the  export  department  as  part  of 
the  business  organization  versus  the  separate  export  selling 
company. 

Under  what  conditious  is  it  advisable  to  establish  a 
separate  export  sales  company  to  handle  export  transac- 
tions ? 

In  what  respect  do  organization  problems  of  such  sepa- 
rate companies  differ  from  those  of  the  export  organiza- 
tion as  an  integral  part  of  the  individual  business  ? 


EXPORT  SALES  ORGANIZATION  29 

2.  Built-in  versus  separate  export  department. 

What  are  the  characteristics  of  each  type? 

What  relation  does  the  built-in  department  bear  to  the 
other  departments?  What  is  the  relationship  of  the 
separate  export  department  to  other  departments  ? 

Under  what  conditions  is  the  separate  export  department 
to  be  preferred  to  the  built-in  department  1 

3.  Line,   line-and-statf,    functional,   and   committee   types   of 
organization. 

Which  form  possesses  the  greatest  advantages  for  the 
export  department  of  the  individual  firm?  To  what  ex- 
tent can  the  advantages  of  these  forms  be  secured  in  a 
small  enterprise  ? 

What  changes  are  required  to  remove  difficulties  in 
established  concerns  due  to  overlapping  of  authoritj''  and 
incorrect  organization  "I 

Is  committee  organization  desirable  in  the  management 
of  export  trade?  Should  committees  have  purely  advi- 
sory or  mandatory  power? 

4.  Cooperative  export  organization. 

(a)  Types  of  cooperative  export  organization. 

(b)  Legal  status. 

What  are  the  advantages  derived  by  a  concern  through 
memhership  in  an  organization  of  manufacturers  of 
allied  or  non-competing  products  to  carry  on  export 
trade?  A  cooperative  organization  of  manufacturers  of 
competing  products? 

What  organization  measures  may  be  taken  to  safeguard 
the  interests  of  each  member  of  the  cooperative  export 
sales  company  ? 

What  forms  may  cooperative  export  organizations  as- 
sume ? 

What  are  the  principal  provisions  in  the  articles  of 
organization  ? 


30     PROBLEMS   IN  EXPORT  SALES  MANAGEMENT 

5.  Departmentalization  of  export  organization. 

How  can  the  separation  of  planning  and  performance 
be  applied  in  building  export  organizations? 

To  what  extent  does  this  require  the  utilization  of  offi- 
cials whose  duties  are  devoted  solely  to  planning  and 
research  ? 

Should  the  export  department  subdivide  its  work  on  the 
basis  of  functions  such  as  advertising  management,  ship- 
ping, etc. ;  according  to  product,  so  that  minor  officials, 
salesmen,  and  advertising  are  grouped  according  to  the 
product  to  be  sold ;  according  to  the  types  of  purchasers 
of  the  product,  so  that  separate  salesmen  and  managers 
are  to  be  used  for  large-contract  customers ;  or  on  other 
bases  ? 

6.  Building  the  export  organization. 

Given  a  product  and  method  of  distribution,  how  can  an 
export  department  be  shaped  to  fit  the  financial  resources 
of  the  company  ? 

Given  the  character  and  volume  of  the  products  to  be 
sold  and  limited  financial  resources,  how  are  methods 
of  distribution  to  be  chosen  which  will  permit  of  an 
efficient  export  organization? 

What  organization  is  required  for  selling  direct  to  the 
foreign  retailer  ?  Through  the  export  commission  house  ? 
The  export  merchant?  Through  the  manufacturer's 
agent?     Through  a  cooperative  selling  agency? 

What  organizations  are  required  for  the  following  types 
of  export  business : 

(a)  Mail  order  exclusively. 

(b)  Sale  of  product  through  manufacturer's  export 
agent. 

(c)  Through  export  commission  house  only. 

(d)  To   both   foreign   jobbers   and   retailers   or   only 
through  jobbers. 

(e)  Direct  to  retailers  in  foreign  countries  generally, 
but  to  jobbers  in  some  districts. 

(f )  To  retailers  exclusively. 


EXPORT  SALES  ORGANIZATION  81 

(g)   Through  branch  houses  or  branch  stores  to  job- 
bers, retailers  or  consumers. 

(h)   To  wholesale  consumers;  contract  selling. 

(i)   Direct  to  consunu>i"s  at  retail. 

C.  Export  Department  Personnel. 

1.  The  export  manager. 

What  should  the  qualifications  of  the  chief  export  execu- 
tive be?  Are  the  requirements  for  successful  executives 
in  other  lines  applicable  to  the  export  manager  without 
modification  f  Is  knowledge  of  the  particular  line  of 
business  more  important  than  knowledge  of  export 
technique  ? 

To  what  extent  does  the  separation  of  planning  and 
performance  affect  the  qualifications  required  of  a 
successful  export  executive?  To  whom  should  the 
export  manager  report?  What  should  be  his  place  in 
the  business  organization? 

Should  he  be  developed  from  within  the  organization 
or  chosen  from  outside  on  the  basis  of  export  ability  and 
experience  ? 

i 

2.  The  export  correspondent;  duties  and  qualifications. 

What  is  the  relationship  of  the  correspondent  to  the 
credit,  production,  and  other  departments? 

Should  the  correspondent  be  responsible  directly  to  the 
export  manager? 

3.  The  export  credit  man. 

Should  the  export  manager  or  the  domestic  credit  man- 
ager pass  upon  foreign  credits? 

If  the  concern  has  a  separate  foreign  credit  manager, 
what  should  be  his  relations  with  the  export  manager  and 
export  department  ? 

4.  The  invoice  clerk;  duties  and  qualifications. 

How  should  the  invoice  clerk  be  chosen  and  to  whom 
responsible  ? 


32     PROBLEMS   IX    EXPORT   SALES    MANAGEMENT 

.").  The  shippinji'  clerk ;  thities  and  qualifications. 

Should  the  shipping  clerk  be  a  part  of  the  export  organi- 
zation ? 

6.  Other  members  of  the  export  department. 

To  what  extent  should  the  principle  of  foremanship  be 
applied  in  the  management  of  export  salesmen?  Should 
sales  supervisors  or  field  men  be  employed  in  export  or- 
ganizations ?     If  so.  what  should  bo  tlioir  duties? 

To  what  extent  should  natives  of  foreign  countries  be 
chosen  as  salesmen,  branch  nuuiagers,  and  exclusive  rep- 
resentatives of  American  coucim'us  ? 

Should  branch  managers,  export  salesmen,  and  otliei" 
members  of  the  export  department  be  regarded  as  can- 
didates for  promotion  through  minor  executive  positions 
to  major  positions  in  an  organization? 

J).  Relations  of  the  Export  Department  to  Other  Depart- 
ments. 

1.  Domestic  sales  deparliueiit. 

What  should  be  the  relation  of  The  export  depai'tnunit  to 
the  domestic  sales  department  —supcfioi-.  coordinate,  or 
suboi'dinatc  .' 

Should  the  exi)ort  department  be  combined  with  the 
domestic  sales  department  under  the  headship  of  a  gen- 
eral sales  manager? 

What  organization  is  required  to  make  the  relatioiishi]) 
between  these  two  departments  as  smooth  as  possible  .' 

2.  Advertising  department. 

Should  the  foreign  advertising  (h'])artment  lie  subordi- 
nate to  the  export  department? 

Should  the  domestic  advertising  department  handh^  for- 
eign advertising?  If  so,  should  it  be  done  under  the 
supervision  of  the  ex]ioi'1  manager? 

Who  should  pass  upon  foi'cign  advertising  appropria- 
tiojis  ? 


EXPORT  SALES  ORGANIZATION  33 

Should,  an  export  advertising  agency  perform  the  work 
of  publicity  in  foreign  fields?  If  it  is  decided  to  engage 
the  services  of  an  agency,  is  it  necessary  also  to  maintain 
an  advertising  department? 

3.  Credit  department. 

Should  the  export  credits  be  handled  by  the  domestic 
credit  department  or  by  the  export  department? 

What  organization  measures  assist  in  coordinating  credit 
management  and  export  sales  ' 

Should  the  export  credit  department  be  centralized  or 
decentralized  in  large  organizations  selling  through 
branches  ? 

4.  Production  department. 

To  what  extent  can  organization  provide  for  coordination 
of  export  sales  and  production  ?  What  are  the  advan- 
tages and  disadvantages  of  committees  created  for  the 
purpose  ? 

What  is  to  be  said  for  specialized  coordinating  officers? 

5.  Packing  and  traffic  department. 

What  should  be  the  position  of  the  traffic  department 
with  reference  to  the  export  department? 

Should  the  export  department  have  control  or  super- 
vision over  packing  and  shipping? 

What  means  should  be  adopted  to  secure  proper  co- 
ordination of  activities  if  packing  and  shipping  are  not 
controlled  by  the  export  department? 

G.  Finaiicial  department. 

What  relationship  should  exist  between  the  export  de- 
partment and  the  accounting  and  financial  departments? 

To  what  extent  should  the  financial  department  hold  a 
check  over  the  export  department? 


34     PROBLEMS   IN   EXPORT  SALES   MANAGEMENT 

Problem  1 
Reddington   Company — Location   of   Export   Department 

The  Reddington  Company,  which  manufactures  colored 
paper  and  cardboard  novelties  for  decorative  purposes  at 
fetes  and  hoHday  celebrations,  is  concerned  with  the  ne- 
cessity of  choosing  between  New  York  and  its  plant  in 
western  Pennsylvania  as  a  location  for  its  export  depart- 
ment. Its  export  business  has  up  to  this  time  been  car- 
ried on  under  the  direction  of  the  sales  manager.  It  has 
recently  been  decided  that  the  volume  of  exports  war- 
ranted the  establishment  of  a  separate  export  depart- 
ment. 

Since  the  company  sells  its  merchandise  f.o.b.  mill 
through  its  own  sales  force,  it  is  not  tied  up  with  big  ex- 
port houses.  The  actual  making  out  of  its  insurance  pa- 
pers, bills  of  lading,  and  documents  is  left  to  forwarding 
houses  in  the  various  ports.  Drafts  and  collection  mat- 
ters are  handled  by  New  York  banks.  Since  the  organiza- 
tion has  been  kept  close  together  and  little  time  has  been 
lost  in  communication  between  the  sales  and  production 
departments,  the  company  has  found  it  convenient  to 
carry  on  its  export  business  from  the  factory. 

The  Rohrman  Gompan}^,  which  is  a  competitor  of  the 
Reddington  Compan}^  has  recently  established  its  export 
office  in  New  York  City.  It  sells  its  products  through 
wholesalers  in  the  United  States  and  its  foreign  business 
is  handled  entirely  by  export  houses.  The  company's 
prices  are  quoted  f.o.b.  New  York.  The  firm  located  its 
export  offices  in  New  York  because  that  city  is  the  largest 
export  center  of  the  United  States  and  the  majority  of 
export  companies  and  commission  houses  have  their  main 
offices  at  that  port.  The  company  is  thus  able  to  keep  in 
closer  touch  with  its  agencies  and  secure  a  more  rapid 
filling  of  orders.  Warehousing  facilities  are  available  to 
take  care  of  varying  requirements,  and  the  Rohrman 
Company  has  been  well  satisfied  with  its  present  ar- 
rangement. 


EXPORT  SALES  ORGANIZATION  36 

Should  the  Eeddingtoii  Company  locate  the  offices  of  its 
export  department  in  New  York  City?* 


Problem  2 

Nash  Company — Splitting  the  Export  Department 

Twenty-two  years  ago  when  the  Nash  Textile  Company 
first  entered  the  export  field,  Mr.  McVey,  w^ho  is  now 
president  of  the  organization,  developed  the  trade  with 
England,  India,  South  Africa,  Australia,  New  Zealand, 
and  the  other  British  Possessions.  The  company  now 
has  a  large  export  business,  particularly  in  China  and 
the  Philippines  and  in  practically  all  the  countries  of 
Latin  America.  Its  total  sales  of  cotton  textiles  in  the 
foreign  field  exceed  $1,300,000  a  year.  The  export  depart- 
ment handles  all  foreign  orders  except  those  from  the 
British  Possessions,  which  are  passed  upon  by  the  presi- 
dent because  of  his  personal  acquaintance  with  the  buyers 

*The  location  of  the  export  department  is  discussed  by  Walter  F.  Wy- 
man,  in  Export  Merchandising,  McGra-w-Hill,  N.  Y.,  1922,  Chapter  VI;  by 
B.  Olney  Hough  in  Practical  Exporting,  Johnston  Publishing  Co.,  N.  Y., 
1919,  pages  103-105;  by  Messrs.  'Delgado  and  Kockwell  in  Proceedings  of 
National  Foreign  Trade  Convention,  1921,  pages  127-156.  The  following 
are  among  the  articles  in  export  journals  dealing  with  this  subject: 

The  World's  Marlcets. 

Feb.  1920,  p.  19 — "Housing   New   York's   Exporters." 

June  1920,  p.  29— "Practical  Exporting." 

July  1920,  p.  29— " Practical  Exporting." 

Aug.  1920,  p.  33— "Practical  Exporting." 

June  1921,  p.  25 — ' '  Location  of  the  Export  Department. ' ' 

June  1921,  p.  26 — "Advantages  of  the  Seaboard  Location." 

Export  Trade  and  Exporters'  Review. 

May      14,  1921,  p.     7— "The  Export  Department  at  Seaboard." 
May      14,  1921,  p.  11— "The  Export  Department  at  the    Plant." 
June     11,  1921,  p.  35 — "Export  Department  Location  Depends   on 
Class  of  Goods  Exported." 

It  is  evident  that  the  problem  of  location  arises  particularly  in  plants 
located  inland,  though  instances  may  be  cited  in  which  factories  situated 
in  port  cities  or  even  in  the  Metropolitan  area  of  New  York  have  consid- 
ered it  advisable  to  locate  their  offices  in  lower  Manhattan.  Where  export 
sales  functions  are  performed,  by  officials  having  responsibility  also  for 
domestic  sales,  the  problem  of  location  of  export  department  is  bound  up 
with  the  problem  of  location  of  domestic  sales  department. 


3G     PROBLEMS   IN    EXPORT   SALES   MANAGEMENT 

ill  those  coiiiitrics.  ^[aiiy  of  the  letters  eoiitaiiiiiii>:  or- 
ders from  Britisli  houses  frequently  convey  personal 
messages  to  him,  and  he  has  therefore  been  unwilling  to 
surrender  this  part  of  the  work  to  his  export  manager. 
The  amount  of  business  done  by  the  Nash  Goni]iany  in 
the  British  Possessions  is  $410,000  a  year.  If  this  busi- 
ness in  the  Britisli  Possessions  were  now  to  be  taken  over 
by  the  export  department,  the  personal  contact  between 
buyer  and  seller  would  be  lost.  Although  records  have 
been  kept,  the  export  department  would  have  difficulty  in 
handling  this  business  efficiently  Avithout  a  thorough 
study  of  past  transactions  and  a  complete  explanation  by 
the  president  of  each  customer's  needs. 

At  present  both  the  company's  main  office  and  the  ex- 
port department  are  located  in  Boston,  but  a  number  of 
export  orders  are  handled  through  commission  houses  lo- 
cated in  New  York.  In  South  America  and  China  the  com- 
pany deals  with  the  retailers  through  exclusive  agents  lo- 
cated in  most  of  the  large  cities.  When  these  agents  or 
other  large  customers  of  the  company  visit  the  United 
States  they  usually  make  their  headquarters  in  New 
York,  and  it  is  an  advantage  to  the  firm  to  have  a  repre- 
sentative there  to  greet  them.  Most  of  the  shipments  are 
also  made  from  that  cit}^  because  of  the  better  steamship 
service  which  can  be  secured.  In  arranging  for  cargo 
space  and  in  dealing  through  forwarding  agents  and  com- 
mission houses,  there  is  a  distinct  advantage  in  having  the 
export  department  located  in  New  York.  It  has  been 
agreed,  therefore,  that  the  export  department  should  be 
moved  to  New  Y  ork ;  but  it  has  not  been  decided  whether  • 
the  export  business  ^vith  the  British  Possessions  should 
continue  to  be  carried  on  from  Boston  or  should  be  han- 
dled by  the  export  department  from  its  New  York  office. 

With  the  president  located  at  the  company's  headquar- 
ters in  Boston  still  continuing  to  handle  the  British  busi- 
ness, a  division  of  the  export  business  and  a  duplication 
of  elfort  in  both  the  New  York  and  Boston  offices  would 
result.  If  a  Britisli  order  were  received  it  would  have  to 
be  i)asscd  upon  by  the  president,  the  date  of  ship))ing  set, 
terms  and  ])ri('es  agreed  upon,  and  a  letter  of  acknowl- 


EXPORT  SALES  ORGANIZATION  37 

edgmeiit  sent  to  the  customer.  The  order  would  theu  be 
sent  to  the  factory  to  be  filled,  but  the  shipment  might  be 
made  from  either  Boston  or  New  York.  In  this  case  bills 
of  lading,  securing  of  customs  declarations,  and  similar 
matters  would  have  to  be  attended  to  in  both  cities,  de- 
pending upon  the  port  from  which  the  goods  were  shipped. 
Should  the  Nash  Company  continue  to  handle  exports 
to  the  British  Possessions  from  Boston,  or  should  this 
work  be  concentrated  in  the  hands  of  the  export  depart- 
ment in  New  York  City? 


Problem  3 

The  Northern  Electric  Company — Splitting  Export 
Department  Between  Plant  and  New  York 

The  Northern  Klectric  Company  has  decided  to  open  a 
New  York  office  for  its  export  department.  Although  the 
company  has  salesmen  o])erating  in  most  of  the  countries 
of  Europe  and  South  America  and  in  China  and  Japan, 
it  does  a  substantial  business  through  conmiission  houses 
the  headquarters  of  which  are  usually  in  New  York  City, 
as  are  the  headquarters  of  most  of  the  ocean  transporta- 
tion companies.  An  export  office  and  warehouse  located 
in  this  city  afford  quicker  service  than  would  otherwise 
be  possible,  and  being  near  the  docks  last-minute  changes 
and  corrections  can  bo  made  in  foreign  orders.  Export 
managers'  conferences  frequently  are  held  in  New  York. 
If  new  foreign  salesmen  are  needed  they  can  be  secured 
more  easily  than  anywhere  else,  and  visiting  buyers 
usually  make  this  city  their  headquarters.  In  short,  the 
Northern  Electric  Company  has  decided  that  if  it  wants 
to  continue  the  development  of  its  foreign  business  under 
the  most  favorable  conditions  it  should  locate  its  export 
office  in  New  York,  the  city  where  most  of  the  foreign 
trade  in  electrical  lines  is  carried  on. 

This  firm  manufactures  small  motors  and  electrical 
lixtures  and  appliances  of  all  kinds.  Its  main  factory  is 
located  in  western  Pennsylvania.  wb^^v(>  v:;  t  ,-•  thi;  present 


90657 


38     PROBLEMS  IN   EXPORT  SALES   MANAGEMENT 

time  the  export  department  has  had  its  headquarters. 
The  company  is  continually  carrying  on  research  work 
for  improving  its  product  and  has  the  reputation  both  in 
the  United  States  and  abroad  of  manufacturing  as  good 
equipment  as  can  be  purchased  from  any  of  its  compet- 
itors. 

The  amount  of  export  business  is  so  large  that  the 
domestic  and  export  sales  departments  are  operated  as 
separate  companies,  although  they  are  both  supplied  by 
the  same  plant.  The  export  department  is  made  up  of 
nine  main  divisions  which  have  the  following  functions : 

1.  The  research  division  is  maintained  for  developing 
new  products  and  for  experimenting  with  new  methods  of 
manufacturing  goods  of  foreign  specifications. 

2.  The  planning  division  arranges  with  the  production 
department  for  the  scheduling  of  all  foreign  orders,  fol- 
lows their  progress  through  the  plant,  and  maintains 
proper  coordination  between  the  export  and  production 
departments. 

.3.  The  warehouse  division  provides  storage  for  goods 
for  foreign  shipment  until  they  can  be  turned  over  to  the 
carrier. 

4.  The  accounting  and  statistical  division  keeps  a  rec- 
ord of  the  sales  and  ties  in  the  accounts  of  the  export  de- 
partment with  those  of  the  cost  accounting  and  auditing 
departments  at  the  plant. 

5.  The  estimating  division  quotes  prices  based  on  the 
foreign  specifications  sent  in  by  salesmen.  These  quota- 
tions are  based  upon  the  actual  cost  of  producing  the 
product. 

6.  The  bilUng  department  handles  the  billing  of  each 
customer's  order  and  makes  out  the  necessary  papers  and 
documents. 

7.  The  shipping  division  sees  that  the  goods  are  packed 
properly  and  shipped  in  time  to 'reach  the  steamer  before 
it  sails. 


EXPORT  SALES  ORGANIZATION  39 

8.  The  credit  division  passes  on  all  questions  of  foreign 
credit. 

9.  The  sales  division  has  charge  of  the  hiring  and  con- 
trolling of  all  foreign  salesmen  and  is  responsible  for  the 
securing  of  all  foreign  business. 

The  Northern  Electric  Company  is  now  confronted  by 
the  necessity  of  determining  which  divisions  of  the  ex- 
port department  should  go  to  New  York  and  which  divi- 
sions should  remain  at  the  plant. 


Problem  4 

The  MacKusick  Paint  Company — Organization  for  Direct 
Exporting* 

Like  many  other  American  manufacturers  the  Mac- 
Kusick Paint  Companj^  made  its  first  entrance  into  for- 
eign trade  through  orders  received  from  a  commission 
house.  From  1914,  when  it  began  exporting  ready-mixed 
paints,  until  the  present  time  this  firm  has  continued  to 
work  entirely  through  commission  houses.  Frequently 
performing  the  functions  of  resident  representative  of  a 
foreign  exporting  and  importing  business,  the  commission 
house  disposes  of  shipments  to  the  United  States  and 

*It  is  obvious  that  the  size  and  character  of  an  export  organization  are 
materially  affected  by  the  general  distribution  policies  of  the  concern,  par- 
ticularly with  regard  to  direct  or  indirect  export.  Cf.  pages  15  and  16  above. 
As  a  consequence,  much  published  material  upon  the  export  department 
deals  also  -with  the  broader  phases  of  distribution  policy.  There  is,  however, 
no  detailed  study  of  the  organization  of  the  export  department  available.  The 
best  sources  of  information  upon  the  subject  are  Hough,  Practical  Export- 
ing;  Wyman,  Export  Merchandising  and  several  articles  in  The  World's 
Markets  and  Export  Trade  and  Exporters'  Review.  Among  other  refer- 
ences may  be  cited: 

Printers'  Ink. 

Feb.  6,   1919,  p.   3 — "How  to   Organize   for  World-wide   Business   on 
Advertised  Goods." 

The  World's  Markets. 

Feb.  1921,  p.  25— "The  Control  of  Export  Sales." 
Mar.  1921,  p.  35— "The  Control  of  Export  Sales." 
Apr.  1921,  p.  31— "The  Control  of  Export  Sales." 


40     PROBLEMS   IN    EXPORT   SALES   MANAGEMENT 

8cnds  back  American  iJioduets  as  ordered.  As  a  purchas- 
ing agent  for  foreign  houses  it  is  the  duty  of  the  commis- 
sion house  to  trj^  to  secure  the  lowest  possible  prices  for 
American  goods,  and  the  MacKusick  Company  has  some- 
times been  informed  that  it  must  reduce  its  prices  if  it 
wants  to  secure  an  order.  Frequently  the  same  house  also 
acts  as  the  foreign  sales  representative  of  the  MacKusick 
Company,  and  \\dth  its  foreign  branches  and  connections 
with  foreign  firms  as  purchasing  agent  it  has  been  abk 
to   secure   a   number   of   export   orders    for    ]\IacKusick 

Export  Trade  and  Exporters'  Ilcvicic. 

Oct.  9,   1920,  p.  8— "Ten  Years'   Experience    with   tlie   'Built-in'    Ex- 
port Department. ' ' 

Nov.  20,  1920,  p.  9— "Tlie   Spread    of   the   'Built-in'    Export   Depart- 
ment Idea. ' ' 

Nov.  G,   1920,  p.   8— "The    'Built-in'    and   the   'Separate'    Export    De- 
partments Compared. ' ' 

Irving  National  Bank,  N.  Y.,  1917 — Trad  in//  with  Latin  America,  by 
E.  B.  Filsinger,  pages  57-59. 

U.  S.  Bureau  of  Foreign  and  Domestic  ('oniuierce,  Washington,  1919, 
Miscellaneous  Series  No.  81 — Sellinfi  lo  Foreign  Markets,  by  Guy 
Edward  Snider.  Chap.  Ill — "Direct  Sales  Problems — Organization 
and  Methods  of  the  United  States  Steel  Products  Co.,  of  the  Foreign 
Sales  Department  of  the  International  Harvester  Co. ' ' 

De  Haas,  J.  Anton,  Ph.  D. — Foreign  Trade  and  Shipping,  Alexander 
Hamilton  Institute,  N.  Y.,  1919.     Chapters  VI,  VII  and  IX. 

Preciado,  A.  A. — Exporting  to  the  World,  McCann,  N.  Y.,  1920.  Chap- 
ters III  and  IV. 

Ford,  L.  C.  and  Ford,  Thomas  F. — The  Foreign  Trade  of  the  United 
States.  Scribner's,  N.  Y.,  1920.     Chapter  VI. 

Kidd,  Howard  C.—Kidd  on  Foreign  Trade,  Prentice-Hall,  N.  Y.,  1921. 
Chapter  XX. 

Calvert,  Alfred — Shipping  Office  Organization.  Management  and  Ac- 
counts, Pitman,  London,  1910.     Chapter  I. 

National  Foreign  Trade  Council,  Proceedings  of  Conventions,  1918,  p. 
191,  A.  E.  Ashburner — Developing  a  Foreign  Department. 

Savav,  Norbert,  M.  A.  LL.B — Principles  of  Foreign  Trade,  Ronald 
Press,  N.  Y.,  1919.     Chapters  II,  XII,  XXII  and  XXVI. 

Vedder,  George  C. — American  Methods  in  Foreign  Trade,  McGraw-Hill, 
N.  Y.,   1919.     Chapters  VII  and  XII. 

Wolfe,  Archibald  J. —  Theon/  and  Practice  of  International  Commerce, 
International  Book  Publishing  Co.,  N.  Y.,  19]  9.     Chapter  IV. 

Wynian,    Walter    F. — Direct   Exporting.    BuHiiu\ss    Training    Corporation, 
N.  Y.,   191G.     Chapters  II  and  X. 
Yawman   &    Erbe,    N'.    Y. —  h'ecord    Si/slans   and   Fiting   KiiHipmmt   for   the 

Export  Department. 
Cf.   note   on   problems   45  a^'-    ^"'.    to:   rsfeience  on    commission    houses   and 
export  merchants. 


EXPORT  SALES  ORGANIZATION  41 

paints.  Foreign  customers  are  gvuerally  more  conserva- 
tive than  Americans  and  more  inclined  to  follow  the  old- 
established  methods.  If  they  have  friends  in  the  commis- 
sion, business  or  have  done  business  with  such  a  house 
for  a  number  of  years,  these  merchants  are  inclined  to 
continue  purchasing  from  them,  even  though  they  have 
an  opportunity  to  buy  directly  from  an  American  man- 
ufacturer. These  are  some  of  the  reasons  why  commis- 
sion houses  have  been  able  to  build  up  and  maintain  an 
annual  sales  volume  for  the  MacKusick  Company  of 
nearly  $230,000,  even  during  the  depression  of  1920  and 
1921. 

Although  the  compajiy  has  been  gratitied  by  the  amount 
of  business  built  up  by  the  commission  house,  permanent 
customers  have  not  as  a  rule  been  developed  and  the  firm 
has  decided  that  if  it  is  ever  going  to  build  up  a  large 
sales  volume  in  the  foreign  field  it  must  undertake  direct 
exporting.  This  attempt  to  lessen  the  gap  between  the 
MacKusick  Company  and  its  foreign  customers  is  apply- 
ing to  the  export  field  the  same  policy  which  the  company 
has  always  followed  in  the  domestic  market.  It  is  not  so 
much  a  question  of  saving  money  as  of  service ;  for  the 
first  year  or  two  the  company  would  probably  suffer  a 
loss,  but  by  rendering  better  service  and  furnishing  these 
customers  with  the  kinds  of  paints  they  need,  it  is  hoped 
to  secure  their  good-will  and  to  develop  a  larger  volume  of 
sales  in  the  future. 

The  officials  realize  that  some  changes  in  organization 
may  be  necessary  in  the  shift  from  indirect  to  direct  ex- 
porting, because  such  export  orders  as  have  come  to  them 
have  been  handled  by  the  domestic  sales  department.  It 
is  proposed  to  secure  an  experienced  export  manager 
familiar  with  selling  paint  in  Latin  American  markets  and 
to  send  salesmen  to  Mexico,  Cuba,  the  principal  countries 
of  South  America,  Australia,  and  New  Zealand,  inasmuch 
as  many  of  the  orders  for  paint  have  come  to  the  com- 
mission houses  from  these  fields.  It  is  planned  to  liave 
these  salesmen  call  on  the  most  important  retail  paint 
dealers  in  the  principal  cities  of  each  country.  Several 
months  before  the  salesmen  arc  sent   into  llie  field,  all 


42     PROBLEMS   IN   EXPORT  SALES  MANAGEMENT 

paint  dealers  will  be  circularized  by  mail  with  illustrated 
pamphlets  showing  the  uses  for  MacKusick  paint  in  each 
country.  This  preliminary  campaign  will  be  followed  up 
by  personal  letters  sent  to  all  merchants  evincing  inter- 
est. These  letters  will  be  mailed  at  dates  preceding  the 
actual  visits  of  the  salesmen. 

Every  member  of  the  company  is  enthusiastic  over  the 
new  plan  for  direct  distribution  in  the  export  field,  and 
the  foreign  sales  manager  is  confident  that  although  his 
salesmen  may  secure  but  a  few  orders  on  their  first  trip, 
subsequent  trips  will  bring  greater  returns  and  that  the 
present  sales  volume  in  the  foreign  field  should  be  doubled 
in  two  years'  time.  Two  questions  remain  to  be  decided 
— first,  as  to  what  further  changes  in  organization  will  be 
necessary  for  direct  exporting;  and  secondly,  whether 
the  company  should  deal  with  foreign  customers  exclu- 
sively through  its  own  sales  force  and  direct  correspond- 
ence or  whether  it  should  continue  to  solicit  and  accept 
orders  from  commission  houses  operating  in  the  same 
field. 


Problem  5 

Baer  Manufacturing  Company — Organization   of  Export 
Department* 

For  some  time  the  Baer  Manufacturing  Company  has 
been  considering  the  advisability  of  organizing  a  sepa- 
rate export  department  instead  of  continuing  to  handle 
its  foreign  trade  business  through  its  domestic  sales  de- 
partment.   Recently  the  whole  matter  was  brought  to  a 

Walter  Wyman  lists  the  forms  of  organization  for  export  which  are  to 
be  found  in  accepted  American  practice.' 

(1)  Management  in  immediate  control  of  both  export  and  domestic 
sales,  with  no  titles  indicating  departmental  leadership. 

(2)  Management  in  immediate  control,  with  staff  containing  neither 
sales  nor  export  manager  as  such,  but  where  titles  are  used  to  describe  the 
activities  of  individuals. 

'^World's  Markets,  February  1921,  p.  26.  See  also  subsequent  articles 
in  March  and  April  issues. 


EXPORT  SALES  ORGANIZATION  43 

head  when  Mr.  Baker,  the  export  manager,  walked  into 
the  president's  office  and  said: 

''Last  week  our  credit  department  lost  $31,000  worth  of  busi- 
ness by  refusing  to  accept  orders  from  two  of  our  oldest  and 
most  reliable  customers  in  Cuba.  Today  I  received  cablegrams 
from  both  these  houses  asking  us  to  close  their  accounts  at  once. 
You  know  as  well  as  I  do  that  this  is  not  the  first  time  this  sort 
of  thing  has  happened.  At  a  time  when  we  need  orders  the 
most,  other  departments  are  driving  business  away.  Until  we 
organize  a  separate  department  it  will  be  impossible  for  us  to 
build  up  a  permanent  foreign  business,  and  I  might  just  as  well 
be  out  playing  golf  as  wasting  my  time  around  the  office." 

The  president  immediately  called  the  credit  manager 
on  the  telephone  and  was  told  that  these  two  customers 
had  paid  only  a  small  part  of  the  amounts  due  on  their 
last  shipments,  and  to  allow  any  more  orders  from  them 
to  be  approved  w^ould  be  ''throwing  good  money  after 

(3)  Management  in  immediate  control  of  domestic  sales,  with  an  officer 
of  the  company  acting  as  a  sales  manager,  but  with  a  titled  export  manager 
responsible  for  initiative  and  foreign  sales. 

(4)  Management  in  control  of  separate  domestic  and  export  sales, 
respectively,  headed  by  a  sales  manager  and  an  export  manager  with  no 
common  duties. 

(5)  Management  in  immediate  control  of  export  sales,  with  domestic 
sales  directed  by  sales  manager  with  no  export  duties. 

(6)  Management  in  control  of  domestic  sales  directed  by  sales  man- 
ager; foreign  sales  under  control  of  the  sales  manager. 

(7)  Management  in  control  of  domestic  sales  directed  by  a  sales 
manager;  foreign  sales  handled  by  separate  sales  company. 

(8)  Management  in  control  of  domestic  sales  directed  by  sales  man- 
ager; export  sales  handled  by  branch  house  manager  or  managers  located  at 
seaboard  cities.  Branch  house  manager  or  managers  under  control  of 
management  on  export  activities. 

(9)  Management  in  control  of  domestic  sales  directed  by  sales  man- 
ager, who  also  directs  foreign  sales  handled  by  branch  houses. 

(10)  Management  in  control  of  domestic  sales  directed  by  sales  man- 
ager and  management  in  immediate  control;  export  sales  handled  by  com- 
bination export  manager,  manufacturers'  representative  resident  in  United 
States,  export  commission  houses,  or  combination  export  travelers. 

(11)  Management  in  control  of  domestic  sales  and  export  sales 
directed  by  sales  manager,  who  controls  foreign  sales  handled  by  com- 
bination export  manager  and  other  agencies  outside  the  enterprise. 

(12)  Management  in  control  of  domestic  and  export  sales  directed 
by  combination  sales  and  export  manager,  his  associates  or  assistants 
or  both. 

(13)  Management  in  control  of  domestic  sales  directed  by  sales 
manager;  management  in  immediate  control  of  disposal  of  sales  riglits 
to  outside  interests. 

(14)  Management  in  control  of  domestic  sales  directed  by  sales 
manager;  foreign  sales  rights  sold  to  outside  interests. 


44     PROBLEMS    IN    EXPORT   SALES    MANAGEMENT 

bad."  The  export  manager  said  that  the  customers  had 
given  their  word  that  they  would  i)ay  up  at  a  hiter  date 
and  that  iho  orders  should  have  gone  through  without 
any  difficulty.  He  asked  that  the  question  of  establish- 
ing a  separate  export  department  be  considered  by  the 
executive  committee  at  once.  A  meeting  was  conse- 
quently called  by  the  president  for  the  following  day  and 
Mr.  Baker  was  asked  to  attend. 

(15)  Management  in  control  of  domestic  sales  directed  by  sales 
manager;  all  exporting  handled  by  subsidiary  companies  in  connection 
Avith  their  domestic  sales  and  under  any  one  of  the  preceding  systems 
of  management  control. ' ' 

It  is  extremely  difficult  to  give  an  ade(iuate  picture  of  the  manifold 
variations  in  business  organization  and  their  effect  upon  export  organiza- 
tion. The  following  brief  suggestions  taken  from  a  large  number  of 
organization  charts  and  descriptions  are  illustrative  of   only  a   few: 

(1)  A  cash  register  company. 

Sales  division  in  charge  of  general  sales  manager.  Selling  division — 
first  section  covering  United  States  and  Canada  in  charge  of  assistant 
sales  manager  with  field  assistants,  office  assistants,  promotion  depart- 
ment, sales  school  director,  and  service  division;  second  section  foreign 
sales  covering  Latin  America;  tltird  section  foreign  sales  covering 
Australasia,  and  several  other  branches  are  incorporated  as  subsidiary 
companies;  fourth  section  Germany,  Austria,  and  Central  Europe; 
fifth  section  Great  Britain  and  Ireland;  sixth  section  Scandinavia, 
Holland,  Greece,  and  certain  Central  European  contries;  seventh  sec- 
tion Trench,  Italian,  and  Swiss  subsidiary  companies,  Portuguese, 
Algerian,  and  Egyptian  branches;  eijihtli  section  advertising  division; 
ninth  section  foreign  department  in  the  home  office.  The  sixth  and 
ninth  divisions  are  in  direct  charge  of  the  general  sales  manager. 
All  the  other  divisions,  with  the  exception  of  the  fifth  and  seventh 
which  are  under  one  man,  are  headed  by  separate  assistant  sales 
managers. 

(2)  A  company  manufacturing  inks  and  adhesives. 

President  and  general  manager  in  control  of  sales.  Sales  and 
export  manager  reports  to  geTieral  manager.  Associate  sales  managers 
with  duties  as  follows:  (a)  domestic  distribution  of  ink  and  adhesive 
products;  (b)  ribbon  and  carbon  ])roducts,  ])rices,  and  trade  custom- 
ers; (c)  exports  and  assistant  ink  and  adhesive  sales  manager  for 
domestic  territories;  (d)  ribbons,  inks  and  carbons.  Foreign  credits 
controlled  by  manager  of  foreign  finance,  who  is  also  the  domestic 
credit  manager. 

(.S)    Manufacturer  of  men's  and  \vomeii 's  hats. 

Treasurer  and  two  vice-presidents  report  to  president.  One  vice- 
president  is  works  manager  in  charge  of  production;  the  other  vice- 
president  is  responsible  for  selling  and  jnirchasing.  Sales  manager 
and  export  manager  rejiort  to  second  vice-jiresident.  Most  of  export 
business  done  through  exj)ort  houses  with  headcjuarters  in  New  York. 
Company  has  salesmen  of  its  own  in  certain  territories. 

(4)   Shoe  manufacturer. 

Vice-president,  secretary,  nuinufacturing  superintendent,  sales 
manager,  and  treasurer  all  report  to  president  and  managing  diroctOT, 


EXPORT  SALES  ORGANIZATION  45 

At  thi.s  meeting  of  the  executive  committee  the  sales 
maiiag-er,  general  manager,  and  export  manager  were 
present,  and  as  soon  as  the  prehminaries  were  over  the 
president  asked  the  export  manager  to  state  his  views  as 
to  the  advisability  of  establishing  a  separate  export 
department. 

''Gentlemen/-  said  Mr.  Baker,  "our  company  is  one  of  the 
best^  known  manufacturers  of  hinges,  window  catches,  door 
latches  window  pulleys,  and  other  builders'  hardware  in  this 

filTpH  n  11  'TT'-'-  P"^^"«^ly'  0^1-  company  was  small  and 
filled  only  local  demands.  Its  sales  and  production  departments 
were  organized  accordingly.  Now  we  have  expanded,  established 
tAvo  branch  factories,  and  secured  national  distribution  of  our 
product.  In  the  old  days  when  the  home  market  was  glutted 
and  we  could  not  dispose  of  our  stock  here  in  the  United  States 
we  got  in  touch  with  an  export  commission  house  in  New  York 
(  ity  aiKl  arranged  to  sell  our  surplus  in  other  countries  at  any 
Sales  (lej.arhncnt  divided  into  sections  in  charge  of  Ca)  store  sales 
™l'or:    ^.^     ^\-^;^;-^  ^I--fieation  nu-nager;    (c)    sSL 'prno^tn' 

•  n^er'  ^cLWl?  V  f^'"'t  '"^"'  "manager;  (e)  advertising 
mmagei.  (,,edit  department  under  control  of  treasurer  Exnort 
selling  agencies  and  salesman  report  to  agency  and  export  sales 
manager  or  to  his  assistant.  '  ^  "    ^"'^^ 

(.'>)   A  concern  manufacturing  low-priced  watches 

diS;on"(:^n^5"t^„r"s  ""'^  ''^t^"=  ^'^  ^«"-«t-  -i- 

ijxnoiuji     i^gtneiai     niancli     otnce    mniino-pr^  ■     ^o\     „i„„    •  t    •  . 

(6)   Manufacturer  of  calculating  machines 
To   the   vice-nresident    i,i    „i/  ^reasurei— all    report    to    president. 

manage.-,    the   central    division    „,„„Ser    tl!e   Nei    pSf,    i     r"'!°" 
manager,  an.l  the  eastern  division  InSager  ^  "'""    ''"■"""' 


Cf 
tcr  III 


also  ^liscellaneous  Scrip's  ATr.    ci     c„n-        ■     -■-, 

<nn.uu!>  ,-^iiies  i\o.  81,  belling  in  Foreian  MarTrpfv    Ohn-r. 

is   referred    t»  ;  ,  •         .Wil, tion     ,.    J'?  """^T  '?  'o'™"'  ''"  k'wwledege 
vrhe,,  bv  E    D  Jo  es     F„;^™  n        Admntstrntion  of   IndmIrM  Entir- 

Dieme'r  ;-Vr;„S,£':}'  SSfX^^^i'S^'t/^rt'Sa''^  «"^° 


46     PROBLEMS  IN  EXPORT   SALES   MANAGEMENT 

price  it  would  bring.  Then  our  foreign  trade  consisted  of  dump- 
ing the  company's  surplus  products  in  foreign  markets;  our 
export  business  was  small  and  quite  naturally  it  was  handled 
through  the  sales  department.  Credits,  routing,  packing,  and 
shipping  of  foreign  orders  were  handled  by  the  same  depart- 
ments that  handled  the  domestic  credits,  traffic,  shipping,  and 
packing.  Now,  however,  our  company  has  an  annual  sales  vol- 
ume of  over  $3,000,000,  and  our  exports  constitute  one-third  of 
this  business.  Our  sales  department  still  maintains  its  old  atti- 
tude of  regarding  the  foreign  field  as  a  dumping  ground.  Our 
company  has  not  established  permanent  connections  with  our 
customers  in  foreign  countries,  and  it  has  made  but  little  at- 
tempt to  study  and  develop  that  field. 

' '  Today  we  need  more  business  in  order  to  operate  our  plants 
efficiently.  Our  production  manager  bears  me  out  in  this  state- 
ment. The  domestic  market  is  becoming  more  and  more  nearly 
saturated,  but  to  develop  a  foreign  business  we  must  use  differ- 
ent methods  than  those  that  we  use  in  this  country.  We  are 
attempting  to  break  away  from  export  commission  houses  and  to 
establish  our  own  sales  force  in  the  field.  The  men  whom  we 
send  out  are  trained  and  equipped  no  differently  from  the  men 
we  send  out  in  the  United  States,  although  they  must  face  en- 
tirely different  conditions.  A  number  of  our  customers  have 
been  unnecessarily  offended  by  the  blunt  attitude  taken  by  our 
credit  department,  which  has  treated  our  foreign  customers  in 
exactly  the  same  manner  it  has  treated  our  American  clientele. 
The  president  has  told  you  of  the  orders  and  customers  that  we 
lost  last  week.  Shipments  are  often  packed  without  sufficient 
care  or  careful  checking,  and  we  have  lost  other  customers 
through  failing  to  have  our  goods  arrive  on  time.  The  only 
way  that  we  can  build  up  a  fareign  business  and  hold  our  cus- 
tomers after  we  have  spent  time  and  money  in  securing  them  is 
to  organize  a  separate  export  department  to  specialize  in  this 
trade. ' ' 

After  the  members  of  the  executive  committee  had 
asked  a  few  questions  and  had  satisfied  themselves  that 
an  export  department  could  bo  established  without  bring- 
ing in  any  outside  men  except  those  needed  to  increase 
the  sales  force  in  the  foreign  field,  they  asked  the  sales 
manager,  Mr.  Walker,  to  state  his  views.  Mr.  Walker 
said: 

' '  The  largest  part  of  our  business  has  always  been  in  America 
and  it  is  our  domestic  business  that  has  been  most  profitable.  I 
don 't  need  to  bring  up  examples  of  foreign  shipments  on  which 
the  company  has  been  forced  to  suffer  a  loss.    We  have  in  the 


EXPORT  SALES  ORGANIZATION  47 

past  shipped  p,oods  to  Brazil  and  our  customers  have  refused  to 
accept  them  after  they  arrived  because  they  could  buy  at  a  lower 
price  from  German  and  English  competitors.  It  is  true  that  they 
said  our  shipments  were  short  and  that  some  of  our  goods  were 
defective,  but  these  shipments  were  exactly  the  same  as  those 
we  had  sent  before  on  which  no  objections  had  been  raised. 
Americans  are  quicker  to  take  up  improved  products  and  better 
ways  of  doing  things,  but  in  almost  every  case  foreigners  must 
be  educated  to  appreciate  improvements.  They  like  the  old  pat- 
terns that  we  put  out  ten  years  ago.  Furthermore,  our  foreign 
customers  are  fussy.  They  think  they  must  have  something  a 
little  different  from  our  standard  stock.  In  order  to  satisfy 
them  we  have  had  to  turn  out  special  orders  at  such  a  cost  that 
we  have  been  able  to  realize  only  a  nominal  profit  on  many  of 
our  shipments  abroad. 

"If  we  are  to  organize  a  separate  department  to  handle  the 
granting  of  credit,  routing,  packing,  and  shipping  of  our  ex- 
port orders,  it  means  duplication  of  effort  and  increased  cost. 
For  the  past  three  years  we  have  been  doing  everything  possible 
to  cut  down  our  overhead.  Certainly  we  cannot  reduce  expenses 
if  we  are  going  to  organize  a  department  which  is  to  handle 
identically  the  same  work  that  is  taken  care  of  by  our  present 
departments.  Our  present  system  has  worked  very  well.  We 
have  shown  an  increase  in  sales  volume  for  the  past  eleven  years, 
'through  periods  of  prosperity  and  of  depression.  This  company 
was  founded  to  build  up  an  American  business,  and  only  when 
we  have  had  a  surplus  have  we  disposed  of  it  abroad.  I  believe 
that  we  ought  to  continue  our  present  policy  of  developing  that 
portion  of  the  business  on  which  there  is  the  greater  rate  of 
profit  and  not  waste  our  time  trjang  to  fool  around  with  a  bunch 
of  foreigners  who  nine  times  out  of  ten  do  not  know  what  they 
want. ' ' 

Would  it  be  advisable  for  the  Baer  Manufacturing 
Company  to  establish  a  separate  export  department? 
Would  the  decision  be  altered  if  export  credits  were  to 
continue  in  the  control  of  the  domestic  credit  department? 


Problem  6 

Kimball  Company — Organization   of   Export   Department 

The  Kimball  Company  is  i)]aiiiiing-  to  i^ive  more  atten- 
lion  to  the  develo]mieiit  of  its  foreign  trade.  For  a 
number  of  years  the  iii-m  lias  handled  all  ex])ort  trade 


48     PROBLEMS   IN  EXPORT   SALES   MANAGEMENT 

under  the  direction  of  its  domestic  sales  manager.  Re- 
cently, like  many  other  manufacturers,  it  has  been  expe- 
riencing serious  difficulty  in  maintaining  its  foreign  sales 
volume.  Business  conditions  and  exchange  rates  have 
been  unfavorable  to  export  trade,  competition  from  for- 
eign houses  is  becoming  keener,  and  customers  are  de- 
manding better  service.  To  handle  its  foreign  sales,  the 
company  has  decided  to  establish  a  separate  export 
department. 

The  Kimball  Company  manufactures  several  different 
grades  of  art  shingles  and  roofing  paper.  Its  products 
are  sold  in  the  United  States  mainly  to  large  consumers, 
lumber  yards,  and  wholesalers  of  builders'  supplies.  In 
the  foreign  field  the  company  is  somewhat  limited  as  to 
markets,  since  in  England  and  on  the  European  continent 
building  construction  is  more  or  less  permanent  and  roof- 
ing paper  is  seldom  used.  Likewise,  in  China  and  other 
sections  of  the  Far  East,  thatch  and  similar  materials  are 
used  for  roofing  purposes.  A  considerable  demand  is 
developing,  however,  in. South  America,  in  sections  of 
Mexico  and  the  West  Indies,  where  the  sugar  companies 
are  building  temporary  barracks,  and  in  Canada,  where 
construction  is  frequently  of  the  same  type  as  that  in 
the  United  States.  In  the  large  industrial  centers  of 
these  territories  the  companj^  sells  direct  through  its  own 
salesforce,  but  in  the  smaller,  outlying  districts  it  some- 
times resorts  to  exclusive  agencies. 

The  company's  sales  offices  are  located  at  its  plant  in 
New  Jersey.  It  is  planned  to  continue  to  handle  all  for- 
eign sales  from  this  location,  and  the  export  department 
will  therefore  be  located  at  the  plant.  The  assistant 
sales  manager,  who  has  specialized  on  distribution  in  the 
foreign  field,  is  to  be  the  head  of  the  new  export  depart- 
ment, but  it  has  not  been  decided  just  how  this  depart- 
ment will  be  organized  or  how  it  will  fit  in  with  the  rest 
of  the  organization.  At  present  the  company  is  consid- 
ering two  different  plans. 

The  first  plan  is  to  have  the  export  manager  respon- 
sible for  the  establishment  of  foreign  branches  and  exclu- 


EXPORT  SALES  ORGANIZATION 


49 


sive  agencies  and  for  the  proper  handling  of  the  sales- 
men. The  export  department  is  to  be  concerned  mainly 
with  the  securing  of  orders.  The  handling  of  all  credit, 
the  hilling,  packing,  and  shipping  of  the  goods,  advertis- 
ing, and  similar  f mictions  are  to  be  carried  on  by  the 
departments  handling  these  functions  for  the  domestic 
business.  On  questions  of  advertising  the  export  man- 
ager is  to  be  on  the  same  footing  as  the  domestic  sales 
manager.  All  advertising  campaigns  will  be  planned  by 
the  export  manager  and  advertising  manager  together, 
the  appropriations  for  which  must  be  approved  by  the 
executive  committee,  made  up  of  the  president,  general 
manager,  and  the  other  division  managers  of  the  com- 
pany.   This  organization  is  illustrated  by  Form  1,  below. 


1 

PRESIDENT 

Vice-President 
General  Manager 

1 

1 

1 

1 

1 

1 

1 

Domestic  Sales 
Manager 

Export  Sales 
Manager 

Advertising 
Manager 

Office 
Manager 

Production 
Manager 

1 

1 

1 

1 

Domestic 
Branches 

Foreign 
Branches 

1 

1 

Production 
Departments 

Billing 

Accounting 

1 

1 

1 

1 

1 

Salesmen 

Foreign 
Salesmen 

Correspondence 

Credit 

Traffic 

1 

1 

1 

Shipping 

Orders 

Orders 

FORM  1.    The  Kimball  Company— First  Proposal  for  Organ- 
ization of  Export  Department 

This  plan  of  organization  avoids  duplication.  It  is 
frequently  possible  for  the  credit  manager  to  delegate 
some  of  his  routine  work  to  others  in  his  department, 
thus  giving  him  ample  time  to  devote  to  the  problem  of 
foreign  credits.  The  heads  of  the  billing,  packing,  ship- 
ping, and  traffic  departments  are  also  able  to  handle  this 
business  as  they  have  done  in  the  past.     By  concentra- 


50     PROBLEMS   IN  EXPORT  SALES  MANAGEMENT 

ting  all  credit  work  under  one  head  it  is  possible  to  secure 
a  better  man  for  the  job,  since  the  position  is  more  im- 
portant and  the  company  frcquentl}^  is  able  to  pay  a 
higher  salary.  The  same  applies  to  a  less  extent  to 
the  other  departments.  To  have  a  large  number  of  peo- 
ple in  the  organization  come  in  contact  with  foreign  trade 
work  has  a  broadening  effect  throughout  the  organiza- 
tion and  tends  to  bring  the  export  policies  into  harmony 
with  the  other  policies  of  the  company. 

The  second  plan  under  consideration  is  to  make  the 
export  manager  completely  responsible  for  everything  in 
connection  with  the  export  business.  Not  only  will  he 
have  charge  of  the  foreign  branches  and  foreign  sales- 
men and  the  securing  of  orders,  but  he  mil  also  be 
responsible  for  the  foreign  credit  and  advertising  poli- 
cies of  the  company  and  for  the  proper  billing,  packing, 
shipping,  and  routing  of  merchandise.  This  type  of 
organization  is  explained  by  Form  2,  below. 


Domestic  Sales 
Manager 


Domestic  Branche! 
I 


Domestic  Orders 


PRESIDENT 


Vice-President 
General  Manager 

I 


Export  Sales 
Manager 


Foreign  Salesmen 


Advertising 
Manager 


Office 
Manager 


Correspondence 


Production 
Manager 


FORM  2.     The  Kimball  Company — Second  Proposal  for 
Organ  ization  of  Export  Department 


This  method  of  oi'ganization  gives  the  export  man- 
ager a  freer  hand.  Not  only  is  he  able  to  secure  orders 
through  the  proper  handling  of  the  salesmen,  but  he  can 
also  assist  his  foreign  representatives  in  securing  busi- 
ness by  making  special  credit  terms  in  the  countries  in 


EXPORT  SALES  ORGANIZATION  51 

which  competition  is  particularly  keen.  Through  his 
study  of  the  foreign  field  and  from  his  contact  with  the 
company's  special  agents,  through  actual  visits  and  by 
correspondence,  the  export  manager  is  in  a  better  posi- 
tion to  judge  the  most  effective  advertising  methods 
than  is  the  domestic  advertising  manager.  By  follow- 
ing up  billing,  packing,  shipping,  and  routing  of  foreign 
orders,  responsibihtj^  for  satisfactory  service  is  cen- 
tered in  the  export  manager.  Under  these  conditions 
an  export  manager  has  no  one  to  blame  but  himself  if 
prompt  and  efficient  service  is  not  rendered  a  foreign 
customer. 

Which  form  of  organization  should  be  adopted  by  the 
Kimball  Company? 

Would  it  be  possible  to  reorganize  the  sales  depart- 
ment in  such  a  way  as  to  avoid  the  necessity  of  a  sepa- 
rate export  department ;  for  instance,  by  having  the 
domestic  sales  manager  and  vice-president  in  charge 
of  sales  so  select  and  educate  the  various  members  of 
the  domestic  staff  as  to  efficiently  handle  both  domestic 
and  foreign  business?  In  the  resulting  organization  the 
advertising  manager  would  be  responsible  for  both  for- 
eign and  domestic  advertising,  the  office  manager  for 
foreign  and  domestic  billing  and  correspondence,  the 
traffic  and  shipping  departments  for  proper  packing, 
shipment,  and  routing  of  foreign  as  well  as  domestic 
orders. 


Problem  7 

The  Hammett  Company — Committee  Organization  as  Applied 
TO  Export  Department 

The  Hammett  Company  manufactures  an  extensive 
line  of  paper  products,  including  labels,  tags,  tissue 
papers,  jewelry  boxes,  paper  articles  for  holiday  trade, 
etc.  The  board  of  directors  consists  of  six  men,  one  of 
whom  is  in  charge  of  purchasing;  the  second  in  charge 
of  manufacturing,   warehousing,   shipping,   finance,   ac- 


62     PROBLEMS   IN  EXPORT  SALES  MANAGEMENT 

counting,  and  office ;  the  third  in  charge  of  the  retail 
stores  maintained  by  the  company  in  five  of  the  larger 
cities ;  the  fourth  in  charge  of  merchandising ;  the  fifth  in 
charge  of  selling  personnel;  and  the  sixth  in  charge  of 
foreign  sales. 

Extensive  use  is  made  of  a  system  of  advisory  com- 
mittees which  are  not  themselves  executive  bodies,  but 
are  in  all  cases  advisory  to  some  executive.  The  work 
that  the  committees  undertake  is  of  various  types,  but 
in  general,  wherever  the  development  of  plans  and  poli- 
cies calls  for  full  presentation  and  understanding  of  the 
interests  of  two  or  more  separate  administrative  units 
of  the  business — for  instance,  production  and  sales,  pro- 
duction and  foreign  sales,  domestic  sales  and  foreign 
sales,  or  the  like — wherever  coordination  is  the  principal 
problem,  committees  are  used  and  the  management 
claims  that  they  fill  a  place  that  cannot  be  filled  by  any 
other  device  of  management. 

Relating  to  domestic  sales  work  there  are  several 
types  of  committees : 

1.  The  subordinate  merchandise  committees. 

2.  The  chief  merchandise  committee. 

3.  The  advertising  committee. 

4.  The  sales  committee. 

The  subordinate  merchandise  committees  are  five  in 
number,  divided  and  named  according  to  the  sales  depart- 
mentalization of  the  product  of  the  company;  e.  g.,  the 
holiday  trade  committee,  the  jewelry  trade  committee, 
and  others.  The  chairman  of  a  committee  is  the  mer- 
chandise manager  for  that  department;  the  man  whose 
duty  in  the  sales  work  is  to  stimulate  the  sale  of  prod- 
ucts placed  in  his  department.  Other  members  of  these 
committees  are  taken  from  the  sales  force  and  from  the 
production  departments.  Each  committee  acts  in  an 
advisory  capacity  to  the  chief  merchandise  committee  on 
such  matters  as  regards  means  of  improving  the  prod- 
uct, packaging,  and  stimulation  of  sales. 

The  chief  merchandise  committee  consists  of  the  five 
merchandise  managers,  those  who  act  as  chairmen  of  the 


EXPORT  SALES  ORGANIZATION  53 

subordinate  committees.  This  committee  passes  on  all 
recommendations  of  the  subordinate  merchandise  com- 
mittees. Briefly,  the  functions  of  the  merchandise  man- 
agers and  of  this  committee  are  as  follows:  direction  of 
sales  by  lines;  instruction  of  salesmen  in  selling;  devel- 
opment of  merchandise ;  control  of  schedules  for  making 
and  introducing  new  merchandise ;  passing  on  all  ques- 
tions relating  to  change  of  labels,  goods,  or  put-up; 
dropping  of  old  merchandise,  or  disposing  of  dropped 
goods ;  recommendation  of  selling  prices  to  the  estimat- 
ing department,  whose  schedules,  in  turn,  must  be 
approved  by  three  directors. 

The  advertising  committee,  which  consists  of  the  ad- 
vertising manager,  one  territorial  sales  manager,  the 
chief  sales  correspondent,  and  the  assistant  manager  in 
charge  of  dealers'  and  consumers'  service  work,  origi- 
nates advertising  plans  and  passes  on  the  recommenda- 
tions of  merchandise  managers  as  to  advertising. 

The  sales  committee  is  an  unofficial  body  consisting 
of  the  territorial  sales  managers,  the  advertising  man- 
ager, the  president,  and  the  director  of  finances  and 
manufacturing,,  which  outlines  the  major  policies  of 
selling  to  be  passed  upon  by  the  board  of  directors. 

Supervision  of  the  sales  force  and  the  total  domestic 
sales,  as  contrasted  Avith  sales  by  departments,  rests 
with  the  director  of  selling  personnel,  who  has  two  assist- 
ants or  territorial  sales  managers  aiding  him.  The 
director  also  acts  as  a  territorial  sales  manager.  A  list  of 
the  functions  of  the  territorial  sales  managers  includes: 

Management  of  district  managers  and  salesmen. 

Jurisdiction  of  total  sales  (sales  by  departmental  lines 
to  be  accounted  for  by  merchandise  managers). 

Passing  upon  questions  of  policy  affecting  relations 
with  customers.  (New  policies  or  interpretation  of 
difficult  cases  rest  vdth  a  committee  of  directors.) 

Direction  of  sales  correspondence  as  recommended  by 
subcommittees  on  sales  correspondence. 

Promotion  of  new  methods  of  selling. 


54     PROBLEMS    IN    EXPORT   SALES   MANAGEMENT 

The  director  in  eliarg-e  of  t'oreii>ii  sales  lias  final 
authority  over  the  ex])ort  sales  organization  and  its 
operation.  The  foreign  organization  is  world-wide,  con- 
sisting of  a  bi-aneh  factory  with  a  sales  organization 
located  at  London,  offices  and  warehouses  at  Rio  de 
Janeiro,  Buenos  Aires,  Mexico  City,  and  Copenhagen, 
and  representatives  in  other  important  centers.  Contact 
between  the  export  and  other  departments  is  maintained 
chiefly  through  informal  conferences  between  the  direc- 
tor ill  charge  of  foreign  sales  and  the  appropriate  depart- 
ment heads.  Since  the  director  of  foreign  sales  considers 
it  necessary  to  travel  a  good  deal  during  the  next  few 
years  in  order  to  re-establish  foreign  agencies  affected 
by  the  unsettled  conditions  of  the  past  five  years,  the 
question  has  come  up  in  acute  form  as  to  whether  the 
various  merchandise  managers  and  merchandise  com- 
mittees should  be  given  the  same  power  with  respect  to 
export  sales  that  they  now  occupy  with  respect  to  domes- 
tic sales.  In  effect  this  would  amount  to  placing  the 
director  of  foreign  sales  on  a  level,  as  far  as  authority 
and  duties  were  concerned,  with  the  director  of  selling 
personnel,  who  under  the  present  organization  operates 
solely  in  the  domestic  field.  Should  the  proposal  be 
adopted!*  Should  the  merchandise  committees  have 
mandatory  power? 

*Modern  Sales  Organization,  issued  by  the  Dartnell  Corporation  of 
Chicago,  contains  several  examples  of  other  types  of  committee  organi- 
zation in  domestic  trade.  An  interesting  example  is  an  earlier  organiza- 
tion of  the  Greenfield  Tap  &  Die  Company,  manufacturers  of  a  large 
line  of  machine  tools,  pipe  tools,  and  small  tools  used  in  Avood  and  metal 
working  trades.  Their  sales  organization  is  of  the  committee  type,  the 
direction  of  sales  being  divided  between  throe  sales  managers,  each  one 
in  charge  of  a  particular  line  of  products — namely,  nuxchine  tool  sales 
manager,  pipe  tool  sales  manager,  small  tool  sales  manager — and  the 
sales  promotion  manager.  These  four  managers  act  as  a  committee  in 
the  mniiagcment  of  district  s;iles  managers  in  the  domestic  nuirket,  and 
through  thoni  the  salesmen,  while  the  general  superintendent  of  production, 
the  merchandise  manager,  the  export  sales  manager  and  tlie  sales  promo- 
tion manager  make  up  what  is  called  the  "])lanning  board,"  the  members 
of  which  are  under  the  control  of  the  vice-president  and  general  manager, 
who  is  chairman  of  the  planning  board.  The  duty  of  this  planning  board 
is  to  bring  about  cooperation  and  coordination  in  the  activities  of  the 
various  members;  of  the  organization.  The  sales  promotion  manager  has 
cliarge  of  the  printing,  advertising,  dealers'  service,  and  research.  The 
merchandise  manager  has  charge  of  orders,  claims,  service,  stocks,  bills 
and  stenographers.  The  duties  of  the  other  managers  are  indicated  by 
their  titles. 


EXPORT  SALES  ORGANIZATION  55 

The  president  of  the  concern  is  a  strong  believer  in  the 
Taylor  principles  of  scientific  management,  particularly 
in  the  separation  of  planning  and  performance.*  This^ 
has  been  carried  out  to  a  very  great  extent  in  the  pro- 

*Iii  the  development  of  scientific  management  as  applied  to  production, 
a  cardinal  jjrineiple  lias  been  the  separation  of  the  function  of  planning 
from  that  of  performance.  While  the  various  advocates  of  so-called 
"scientific  management"  have  modified  more  or  less  the  principles  as 
enunciated  by  Frederick  W.  Taylor,  this  general  division  and  the  emphasis 
upon  functional  organization  have  been  retained.  The  Taylor  Society, 
an  organization  devoted  to  the  furtherance  of  scientific  study  of  manage- 
ment, has  undertaken  to  promote  the  movement  for  the  application  of 
principles  which  have  been  successful  in  production  management  to  the 
management  of  sales.  As  a  first  step,  committees  were  appointed  and 
an  investigation  made  of  representative  sales  departments.  At  a  meeting 
of  the  Taylor  Society,  preliminary  reports  were  presented  by  a  committee 
on  the  organization  and  functions  of  the  sales  engineering  department 
and  a  committee  on  the  organization  and  functions  of  the  sales  operating 
department.     These  conclusions  were  briefly  as  follows:^ 

"(1)  The  conditions  or  causes  which  have  led  to  the  establishment 
of  engineering  and  operating  as  separate  major  functions  in  the  pro- 
duction of  products  exist  also  with  respect  to  distribution  and  indicate 
the  necessity  for  the  recognition  of  engineering  and  operation  as  major 
functions  in  the  production  of  sales. 

(2)  Master  planning  and  scheduling  can  properly  be  considered  sales 
engineering,  delegating  detailed  planning  and  scheduling  as  secondary 
functions  of  operation.  If  one  concedes  that  the  distributing  organi- 
zation is  the  one  that  usually  and  naturally  originates  projects  involving 
the  whole  jjlant  organization,  then  it  becomes  obvious  that  a  research 
and  master  planning  and  scheduling  function  must  have  a  close  and 
sympathetic  relation  with  the  distribution  organization;  hence  the 
choice  of  the  name  "Sales  Engineering"  for  this  major  function. 

(3)  The  sales-engineering  function  presents  at  least  three  distinct 
phases : 

(a)  Field   research. 

(b)  Technical  assistance. 

(c)  Master  planning  and  scheduling. 

(4)  It  should  be  recognized  that  the  major  functions  of  sales  engi- 
neering is  to  analyze,  plan  and  schedule  future  projects  and  that  the 
planning  and  scheduling  of  current  projects  is  a  function  of  the 
operating  divisions. 

(5)  Selling  seems  to  break  down  into  tAvo  major  functions,  distinct 
in  their  nature  and  in  the  types  of  personnel  required  for  their  per- 
formance : 

(a)  The  making  of  larger  plans  for  the  marketing  of  a  product, 
involving  analysis  of  the  market  and  the  product,  the  preparation  of 
master  schedules,  and  the  coordination  of  production,  financial  and 
selling  resources;  called  Sales  Engineering,  Sales  Planning,  Merchan- 
dising, Merchandise  Control,  etc.,  and  in  many  instances  cared  for 
by  advertising  or  selling  agencies. 

(b)  The  actual  conduct  of  the  selling  operations,  involving  the 
detailed  planning  of  selling  operations,  the  selection,  training  and 
direction   of   the   sales    force,    the   detailed  planning   and   conduct   of 

^Bulletin  of  the  -Taylor  Society,  Vol.  V,  No.  6,  December,  1920. 


56     PROBLEMS   IN  EXPORT  SALES   MANAGEMENT 

duction  department  and  to  some  extent  in  the  domestic 
sales.  Would  the  proposed  change  be  in  line  with  this 
general  development  ? 


Problem  8 

The   Townsend   Rubber   Company — Functional  Organization 
OF  the  Export  Department 

The  Townsend  Rubber  Company  manufactures  an 
extensive  line  of  rubber  footAvear  and  automobile  tires, 
which  is  sold  exclusively  through  its  allied  company,  the 
Townsend  Rubber  Sales  Company,  the  directors,  corpo- 
rate officers  and  stockholders  of  which  are  identical  mth 
those  of  the  manufacturing  concern.  The  rubber  sales 
company  is  headed  by  the  manager  of  distribution,  to 
whom  report  the  manager  of  tire  sales,  the  manager  of 
merchandise,  the  manager  of  advertising,  the  manager 
of  footwear  business,  the  manager  of  footwear  jobbers, 
the  manager  of  export  sales,  and  the  manager  of  sales 
information.  To  the  manager  of  export  sales  report  the 
deputy  manager  of  export  sales,  the  export  correspon- 

selling    operations    -when    salesmen    are    not    used,    and    all    contacts 

Avith  the  customer ;   called  in  this  report  ' '  Sales  Operating. ' ' 

(6)   Sales  Operating  seems  to  break  down  into  two  principal  functions: 

(a)  The    detail    planning    for    the    preparation    of    materials    and 

for   the   supervision   and   control   of   all   elementary   selling   processes. 

(This  function  breaks  down  into   elementary  functions  or  processes.) 

(Z;)    The  actual  conduct  of  sales  operations  in  accordance  with  the 

planning  and  control  established  in  6(a).    (This  function  also  breaks 

down  into  elementary  functions  and  processes.) 

This  report  is  concerned  with  6    (a)    only;   investigation  of  G    (h) 
is  to  come  later. 

(7)  Conclusions  (5)  and  (6)  are  the  result  of  a  study  of  a  variety 
of  selling  departments  and  present  functions  which  seem  to  be  inherent 
in  selling ;  they  are  not,  however,  recognized  by  every  selling  organi- 
zation and  their  execution  provided  for  by  functionalized  parts  of 
the  organization.  In  one  organization  one  or  more  functions,  in  another 
organization  other  functions,  are  recognized  and  defined. 

(8)  Taylor  has  shown  by  his  Avork  in  production  that  proper  results 
can  be  brought  about  only  by  systematized — not  systemized — work,  in 
Avliieh  plans,  functions,  duties  and  execution  are  all  clearly  defined.  This 
is  what  your  committee  desires  to  sec  done  for  selling. 

While  as  yet  no  one  has  attempted  to  apply  this  in  detail  to  export 
selling,  there  is  no  good  reason  why  the  general  idea  of  separating  plan- 
ning and  performance  cannot  be  so  applied. 


EXPORT  SALES  ORGANIZATION  57 

dent,  and  the  New  York  export  sales  representative.  The 
duties  and  relationships  of  these  officials  are  best  shown 
from  the  following  extracts  from  the  organization 
manual : 

Duties  of  Sales  Manager  of  Exports 

1.  He  is  to  have  general  supervision  of  exports. 

2.  Specifically,  he  is  to  take  charge  and  control  of 

(a)  All  salesmen  in  this  division  of  the  work. 

(b)  Use  of  contracts  by  salesmen. 

(c)  Discounts  within  budget  allowance. 

3.  He  is  to  carry  out  sales  campaigns  prepared  by  confer- 
ence with  the  Manager  of  Distribution  and  the  statistics 
department. 

4.  He  is  to  cooperate  with  the  credit  department  in  its  work. 
Duties  of  Deputy  Export  Sales  Manager 

1.  He  is  to  act  in  absence  of  the  sales  manager  of  exports ; 
he  is  to  read  over  incoming  mail  pertaining  to  footwear 
export  sales,  passing  along  to  the  export  correspondence 
clerk  all  inquiries  for  him  to  handle,  and  to  the  manager 
of  footwear  merchandise  all  orders  or  letters  relating  to 
orders  already  placed. 

Duties  of  Export  Correspondence  Clerk 

1.  He  is  to  handle  correspondence  relating  to  foreign  sales. 

2.  He  is  to  attend  to  the  details  of  sending  sample  orders. 

3.  He  is  to  tabulate  inquiries  from  foreign  customers  and 
exporters. 

4.  Maintain  statistics  of  export  trade. 

Duties  of  ^^eW  York  Export  Sales  Representative 

1.  He  is  to  develop  the  export  tire  business  with  head- 
quarters in  New  York  City. 

2.  On  footwear  he  is  to  solicit  export  business  in  the  vicinity 
of  New  York  or  from  buyers  of  the  foreign  countries 
from  time  to  time. 


68     PROBLEMS  IN   EXPORT   SALES   MANAGEMENT 

Foreign  branches  must  report  to  the  manager  of 
accounts  upon  all  matters  pertaining  to  accounts,  to  the 
manager  of  credits  upon  all  matters  pertaining  to  cred- 
its, while  expenditures  outside  budget  allowances  must 
be  referred  to  the  manager  of  finances.  Lastly,  office 
systems  are  subject  to  the  office  manager.  While  nom- 
inally all  orders  go  through  the  export  sales  manager 
and  managers  of  particular  branches,  practically  orders 
are  not  changed  and  the  manager  of  distribution  must 
transmit  the  orders  of  the  other  coordinate  managers. 
The  manage]"  of  export  sales  claims  that,  instead  of  hav- 
ing a  section  of  the  credit  office  under  the  manager  of 
credits  devoted  to  export  credits,  it  would  be  better 
organization  to  have  that  section  transferred  to  the 
export  department,  for  the  reason  that  the  conditions 
of  export  trade  are  so  different  that  the  export  credits 
could  be  better  handled  as  a  part  of  the  export  depart- 
ment. He  makes  the  same  claim  mth  respect  to  office 
management,  to  the  effect  that  office  management,  han- 
dling of  orders,  billing,  and  other  duties  should  be  left 
to  the  control  of  the  export  department  and  should  not 
be  under  the  control  of  the  office  manager.  While  he 
admits  that  there  has  been  no  harmful  conflict  of  author- 
ity under  present  conditions,  it  is  claimed  that  the  sud- 
den change  of  personnel  through  death  or  resignation  of 
any  of  the  officials  might  bring  about  a  change  of  policy 
or  a  lack  of  harmony  which  would  be  disastrous  and  that 
even  at  present  having  the  final  decision  upon  export 
credits  rest  with  the  manager  of  credits  and  not  with  the 
export  executive  prevents  the  development  of  the  most 
desirable  relations  with  many  foreign  customers. 

Would  the  best  interests  of  the  Townsend  Company  be 
served  by  the  proposed  changes'? 


EXPORT  SALES  ORGANIZATION 


59 


Problem  9 

The  Crowell  Company — Organization  of  a  Separate  Export 

Company 

The  export  department  of  the  Crowell  Company  is 
having  considerable  difficulty  in  meeting*  cut-price  com- 
petition and  in  satisf>dng  the-  manufacturers  of  allied 
products  carried  by  its  salesmen  that  their  lines  are 
receiving  proper  distribution.  This  company,  which  is 
a  large  manufacturer  of  valves  and  steam  fittings,  has 
been  identified  for  over  fifty  years  with  export  business 
throughout  the  w^orld;  its  organization  is  given  roughly 
in  Form   3,   below.     At   first   this   firm   dealt   through 


PRESIDENT 


Executive 
Committee 


Vice-President 


Staff  Assistant 


Vice-Presidpnl 
products) 


Staff  Assistant 


Comptroller 


Vice-President 
Engineer 


Purchasing  Agent 


Vice-President 
sales) 


Employment  Manager 


Traffic  Manager 


Manager 
anch  Ho 


FORM   3.     The    Crowell   Company — Organization    Chart 

conmiission  houses,  bat  about  twelve  years  ago  it  began 
placing  its  own  salesmen  in  foreign  fields.  In  order  to 
lower  the  selling  cost  of  its  export  business,  the  Crowell 
Company's  salesmen  sell  kindred  lines  of  merchandise 
on  a  commission  basis.  The  allied  products  thus  handled 
are  crucible  iron,  rubber  hose,  rubber  packing,  rubber 
belting,  steam  specialties,  and  steel  cutting  and  thread- 
ing tools.     AVhen  its  foreign  business  was   small,  the 


60     PROBLEMS  IN   EXPORT  SALES   MANAGEMENT 

export  department  functioned  satisfactorily,  but  now 
that  its  foreign  business  amounts  to  $1,200,000  worth  of 
valves  and  steam  tittings  and  almost  .$3,000,000  worth 
of  allied  i:>roducts  annually,  complications  have  resulted 
and  the  export  dei)artment  does  not  seem  to  have  the 
degree  of  specialization  required  although  it  was  reor- 
ganized about  a  year  ago.  The  firm  is  therefore  consid- 
ering the  advisability  of  organizing  a  separate  corpora- 
tion to  handle  this  export  business.  The  new  corporation 
w^ould  continue  to  handle  the  allied  lines  until  the  volume 
of  its  own  business  rendered  it  advisable  to  discontinue 
them. 

This  new  corporation,  which  would  be  lvno^^^l  as  the 
Crowell  Export  Company,  would  have  its  headquarters 
in  New  York  City  and  would  confine  its  activities  to 
export  business.  The  vice-president  in  charge  of  sales 
would  become  also  president  of  the  new  corporation, 
while  the  export  manager  would  be  in  active  charge  of 
the  New"  York  office.  Ordinarily  the  export  corporation 
would  not  sell  merchandise  through  commission  houses, 
but  would  have  its  own  corps  of  salesmen  in  the  field. 
A  uniform  connnission  rate  would  be  charged  the  Crowell 
Company  and  all  allied  firms  making  use  of  the  com- 
pany's services.  This  corporation  would  take  the  re- 
sponsibility for  all  credit  risks  and  making  out  of  the 
proper  documents.  It  would  not  maintain  a  warehouse, 
the  merchandise  being  shipped  from  the  factories  accord- 
ing to  the  orders  of  the  salesmen.  All  the  stock  of  this 
corporation  would  be  held  by  the  Crowell  Company. 

A  separate  corporation  of  this  type  might  become  a 
member  of  an  association  of  competing  exporters, 
exchange  information,  and  even  enter  into  a  legal  com- 
bination on  prices  for  the  export  field  in  accordance  with 
the  provisions  of  the  Webb-Pomerene  Law.  This  w^ould 
eliminate  to  a  considerable  extent  price  competition 
among  American  houses  and  would  be  a  decided  advan- 
tage in  meeting  the  competition  of  foreign  firms. 

The  allied  companies  now  selling  their  products  abroad 
through  the  services  of  the  Crowell  Company's  salesmen 
would  undoubtedly  prefer  to  deal  with  a  separate  cor- 


EXPORT  SALES  ORGANIZATION  61 

poration.  They  believe  that  a  separate  organization 
whose  business  it  is  to  handle  nothing  but  foreign  trade 
would  be  better  fitted  to  look  after  their  interests  than  a 
company  whose  main  business  is  manufacturing.  These 
manufacturers  are  convinced  that  in  such  an  organiza- 
tion there  would  be  less  likelihood  of  their  particular 
problems  being  overlooked.  They  would  also  feel  more 
nearly  on  an  equal  footing  with  the  Crowell  Company 
and  less  friction  should  result  from  such  an  arrangement 
than  has  been  the  case  where  their  products  have  been 
handled  by  the  present  export  department. 

There  would  also  be  a  gain  because  of  specialization, 
in  so  far  as  the  conduct  of  foreign  business  differs  from 
that  in  domestic  markets.  Foreign  credit,  correspon- 
dence, selling,  and  advertising  would  be  directed  by  men 
experienced  in  dealing  with  foreign  customers.  Increased 
good-will  would  result.  Many  customers  w^ould  rather 
deal  with  an  organization  of  this  type,  since  they  believe 
that  they  will  receive  better  service  than  w^ould  be  ren- 
dered by  the  exjoort  department  of  a  company  whose 
main  business  is  to  meet  the  demands  of  the  domestic 
market. 

Although  it  is  difficult  to  estimate  the  exact  amount  of 
additional  expense,  the  handling  of  foreign  business 
through  a  separate  corporation  would  be  much  more 
expensive  than  if  the  present  export  department  were 
continued.  There  would  also  be  some  duplication  of 
effort,  since  this  new  company  would  require  separate 
accounting,  correspondence,  and  credit  departments  to 
handle  work  that  had  previously  been  taken  care  of  at 
the  factory.  A  separate  company  would  probably  incur 
heavier  losses  in  a  time  of  business  depression,  since  a 
more  elaborate  organization  Avould  be  needed  than  is 
required  by  the  export  department  of  the  Crowell  Com- 
pany. In  case  of  dull- business  it  would  be  difficult  if  not 
impossible  for  such  a  corporation  to  reduce  its  expenses 
substantially,  since,  having  been  foi'med  solely  for  the 
purpose  of  exporting,  the  allied  manufacturers  would 
expect  it  to  redouble  its  efforts  at  such  a  time.    A  fac- 


62     PROBLEMS   IN  EXPORT   SALES  MANAGEMENT 

tory  may  shut  do^^^l  occasionally  clnring  hard  times,  but 
a  sales  organization  of  this  type  must  keep  going  or  it 
will  lose  its  hold  on  the  market.  Since  the  stock  of  the 
export  corporation  would  be  owned  by  the  Crowell  Com- 
pany, the  latter  must  be  prepared  to  stand  this  loss. 

Would  it  be  advisable  for  the  Crowell  Company  to 
organize  a  separate  export  corporation? 


Problem  10 

Lybrand  Manufacturing  Company — Export  Commission 
Houses  versus  Export  Association 

The  directors  of  the  Lybrand  Manufacturing  Company, 
producing  hoes,  rakes,  and  light  garden  tools,  have 
recently  been  invited  to  join  the  Mutual  Exporting  Asso- 
ciation. At  present  this  association  is  made  up  of  firms 
manufacturing  the  following  lines : 

Hammers,  hatchets,  and  axes 

Saws 

Chisels,  planes,  draw  shaves,  and  cutlery 

Locks 

Bolts  and  screws 

Hinges,  window  catches,  and  door  latches 

The  agent  stated  that  his  association  would  be  able  to 
handle  another  allied  line  of  hardware,  and  the  members 
believed  that  with  the  expansion  in  the  farming  and  agri- 
cultural sections  of  both  South  America  and  Europe,  a 
line  of  light  garden  implements  would  be  acceptable  as 
a  complement  to  the  merchandise  now  sold  by  the  associa- 
tion's salesmen. 

The  association  operates  on  a  commission  basis  of  five 
per  cent  upon  the  total  sales  that  it  handles.  It  assumes 
all  credit  risk  and  pays  all  expenses.  Each  manufac- 
turer agrees  to  furnish  such  advertising,  dealer  heli)s, 
and  price  lists  as  may  be  needed  from  time  to  time.  On 
the  first  of  each  month   each  manufactui-er  receives  a 


EXPORT  SALES  ORGANIZATION  63 

check  in  payment  for  his  goods  shipped  during  the  past 
month,  less  the  five  per  cent  commission  due  the  associa- 
tion. In  case  a  deficit  occurs  at  the  end  of  the  year  it  is 
mot  by  assessment  on  tlie  members  of  the  association 
according  to  the  sales  volume  of  their  exported  merchan- 
dise. 

Although  the  Lybrand  Manufacturing  Company  for 
several  years  has  exported  $700,000  worth  of  its  product 
annually,  it  has  failed  to  establish  any  permanent  cus- 
tomers in  foreign  markets.  Its  shipments  have  been 
handled  through  export  houses  which  maintain  their  o\vii 
salesmen  in  these  fields.  These  houses  usually  charge 
from  three  per  cent  to  seven  per  cent  commission  and  the 
prices  realized  on  the  company's  sales  have  not  been 
large  enough  to  yield  more  than  a  nominal  profit. 

After  discussing  the  plan  iiiformally  at  a  directors' 
meeting,  Mr.  Russell,  one  of  the  directors  of  the  Lybrand 
Manufacturing  Company,  said,  "My  chief  objection  to 
joining  an  exporting  association  is  that  I  am  not  at  all 
sure  our  goods  would  receive  the  proper  consideration. 
When  several  lines  are  handled  by  one  salesman,  he  may 
be  tempted  to  neglect  one  line  in  order  to  push  other 
lines  in  which  he  is  more  directly  interested." 

In  reply  the  association's  representative  said,  "I  have 
never  heard  of  such  a  complaint  from  the  present  mem- 
l)ers  of  the  organization,  although  I  admit  that  such  a 
thing  might  be  possible.  This  disadvantage  of  the  coop- 
erative selling,  however,  is  offset  by  the  fact  that  by 
uniting  each  manufacturer  reduces  his  distributing  costs, 
since  a  salesman  will  carry  six  allied  lines  of  goods 
instead  of  one,  and  by  bunching  shipments  it  is  hoped  to 
secure  better  freight  rates  and  quicker  service." 

The  president  of  the  Lybrand  Company  said  frankly: 

"I  have  been  opposed  to  joining  an  export  association  because 
if  goods  are  shipped  and  a  shortage  occurs  due  to  loss  or  break- 
age, a  foreign  merchant  is  likely  to  refuse  to  aecei)t  the  ship- 
ment. The  association  tlien  would  make  an  fidjustmeut  and 
because  it  is  not  so  close  to  the  cost   of  production  as   is  the 


64     PROBLEMS   IN  EXPORT   SALES   MANAGEMENT 

manufacturer,  it  might  not  look  after  the  business  interests  of 
the  company  with  the  same  care.  The  loss  from  such  an  adjust- 
ment would,  of  course,  fall  on  the  manufacturer. 

"For  example,  some  friends  of  mine  who  are  members  of  a 
similar  association  sent  a  shipment  to  South  America.  When 
it  arrived  the  market  had  dropped  and  the  customer  demanded 
an  adjustment  of  $200.  Because  the  freight  had  been  paid  and 
the  association  did  not  believe  it  could  sell  the  goods  at  a  more 
favorable  price,  the  adjustment  was  allowed  and  the  company- 
lost  all  its  profit  on  the  sale." 

The  agent  of  the  association  argued  that  a  company 
would  suti'er  no  greater  risk  as  a  member  of  the  associa- 
tion than  selling  through  commission  agents,  since  in 
either  case  it  must  stand  the  loss  due  to  breakage  or  loss 
in  transit. 

"The  more  I  see  of  committees,  conferences,  and  associations," 
said  one  of  the  directors,  ' '  the  more  I  think  we  are  better  off  if  we 
have  nothing-  to  do  with  them.  In  this  particular  case  since  any 
deficit  of  the  association  is  to  be  assessed  on  the  members  accord- 
ing to  their  export  sales  volume,  it  seems  quite  possible  that 
some  of  the  members  might  be  called  upon  to  pay  for  the  loss 
due  to  the  association's  carrying  a  line  of  merchandise  which 
required  too  great  a  selling  expense  to  introduce.  I  am  in  favor 
of  continuing  our  present  policy  of  letting  a  commission  house 
handle  our  foreign  business." 

Would  it  be  advisable  for  the  Lybrand  Manufacturing 
Company  to  join  the  Mutual  Exporting  Association?* 

*A  considerable  body  of  literature  upon  cooperation  in  export  trade  has 
grown  up,  particularly  since  the  publication  of  the  findings  of  the  Federal 
Trade  Commission  in  the  two-volume  report.  Cooperation  in  Export  Trade, 
and  the  resulting  recommendation  on  the  part  of  the  Commission  for  the 
enactment  of  a  law  legalizing  export  combinations.  The  introduction  and 
passage  of  the  Webb-Pomerene  Law  gave  an  impetus  to  further  writing. 
The  most  comprehensive  study  of  American  export  combination  is  Notz  and 
Harvey,  American  Foreign  Trade,  Parts  III  and  IV.  Other  informaiton  is 
to  be  found  in  Hough,  Practical  Exporting,  pages  53-60;  Savay,  Principles 
of  Foreign  Trade,  Chapters  XVI-XIX;  Bonn,  The  Trade  of  To-morrow, 
Chapter  XII;  Ilauser,  Germany's  Commercial  Grip  on  the  World,  Part  II, 
Chapter  II;  Kidd,  Kidd  on  Foreign  Trade,  Chapter  XXIII;  Prcciado,  Ex- 
porting to  the  World,  Chapter  X;  De  Haas,  Foreign  Trade  and  Shipping, 
Chapter  X;  Veddcr,  American  Methods  in  Foreign  Trade,  Chapter  III;  and 
in  the  proceedings  of  the  annual  conventions  of  the  National  Foreign  Trade 
Council  from  191 5-1918.  Upon  foreign  combinations  and  their  relation  to 
export  trade,  cf.    Cooperation  in  Export  Trade,  Federal  Trade  Commission; 


EXPORT  SALES  ORGANIZATION  65 

Problem  11 

The  Reardon  Saw  Company — ^Withdrawing  from  Export 
Association  Under  Webb  Law 

The  Reardon  Saw  Company  has  not  been  entirely  sat- 
isfied "\vith  the  results  obtained  from  belonging  to  an 
export  association  formed  under  the  Webb  Law  and  is 
contemplating  giving  up  its  membership,** 

This  organization  was  formed  as  a  cooperative  export 
association  for  the  purpose  of  building  up  the  foreigii 
trade  of  a  group  of  carpenter  and  woodworking  tool 
manufacturers.  The  Reardon  Saw  Company,  the  Starr 
Saw  Company,  and  eight  other  manufacturers  of  wood- 
working tools,  are  members  of  this  association.  All 
have  had  minor  disagreements  from  time  to  time,  but  the 
principal  dissension  exists  between  the  two  saw  compa- 
nies, neither  of  which  is  satisfied  with  the  present 
arrangement. 

Both  the  Reardon  Saw  Company  and  the  Starr  Saw 
Company  manufacture  trade-marked  articles,  which  have 
been  extensively  advertised  and  are  well  Inio^^^i  by  car- 
penters and  woodworkers  throughout  the  United  States. 
When  the  association  was  formed  in  the  summer  of 
1918,  it  was  suggested  that  a  possible  method  of  handling 
this  situation  was  to  divide  the  foreign  territories  be- 
tween the  two  saw  companies  and  have  each  firm  ''stick 
to  its  o^\ni  field."  In  attempting  to  divide  South  Amer- 
ica in  this  fashion,  it  was  found  that  both  companies  had 
already  advertised  in  each  of  the  Latin- American  coun- 
tries and  had  secured  a  hmitcd  distribution  of  their  prod- 
ucts.   Since  they  had  expended  both  effort  and  money  in 

the  following  articles  by  the  writer  in  the  Quarterly  Journal  of  Economics — 
Nov.  1913,  The  Kartell  Movement  in  the  German  Potash  Industry  and  Feb. 
1917,  The  German  Steel  Syndicate,  and  in  The  Annals  of  the  American 
Academy  of  Political  and  Social  Science,  Mar.  1921,  Foreign  Trade  Organ- 
ization in  Europe  since  the  War.  Cf.  also  Eobert  Liefmann,  Bie  Kartelle ; 
and  the  official  English  report  of  the  Sub-committee  on  Trusts.  More 
detailed  information  upon  recent  developments  is  to  be  found  in  the  Board 
of  Trade  Journal  for  England  and  Kartellrundscliau  for  Germany. 

**The  Webb  Law  is  carefully  analyzed  in  Notz  and  Harvey,  American 
Foreign  Trade,  Part  IV.    Lists  of  Webb  Law  combinations  are'to  be  found 


66     PROBLEMS   IN   EXPORT   SALES   MANAGEMENT 

establishing  their  trade-marks  in  this  field,  both  firms 
refused  to  give  up  any  territory. 

Both  saw  companies  finally  agreed  to  adopt  a  miiform 
price  policy  and  not  to  midersell  each  other  in  any  for- 
eign market.  In  this  way  price  competition  with  each 
other  was  avoided  and  these  two  firms  were  enabled  to 
put  up  a  united  front  in  meeting  foreign  competitors. 
Each  company  had  equal  rights  in  all  foreign  markets 
and  furnished  the  export  association  with  circulars  and 
other  advertising  matter  for  distribution  by  the  organi- 

in  reports  of  tlie  Federal  Trade  Commission.     The  Webb  Law  and  its  opera- 
tion are  treated  in  nnmeroiis  articles,  among  whieli  may  be  mentioned  the 

following: 

Tlic  Jnnals. 

March  1921,  p.  130 — "Organization  nnder  the  Webb-Pomerene  Law." 

'Export  Trade  4'  Exporters'  Bcview. 

Apr.   30,   1921,  p.   94— "  Testing  the  Value  of  the  Webb-Pomerene 

Law. ' ' 
June  18,  1921,  p.  9 — "Trade-marks  for  Associations  under  the  Webb- 

Pomeiene  Law. ' ' 
Oct.  1,  1921,  p.  29 — "A  Federal  Trade  Commission  Appraisal  of  the 

Webb-Pomerene  Law. ' ' 

Dartnell  Corporation,  Chicago — "The  New  Plan  of  Cooperation  in  Export 
Selling  with  List  of  Joint  Agencies  already  Organized  and  Operating. ' ' 

Huston  Thompson,  Cliairman  Federal  Trade  Commission,  1921 — "How 
the  Export  Trade  Act  (Webb-Pomerene  Law)  Is  Operating." 

Bureau  of  Foreign  &  Domestic  Commerce,  Miscellaneous  Series  No.  81, 
Selling  in  Foreign  Marliets,  by  Guy  Edward  Snider,  Chapter  VIII. 

Proceedings  of  annual  conventions  of  National  Foreign  Trade  Council. 

1918,  G.  H.  Montague,  p.  302— "Cooperation  under  the  Webb-Pomerene 
Law  for  the  Eehabilitation  of  Europe  after  the  War. ' ' 

George  H.  Charts,  p.  318 — "Organization  of  a  District  Export  Selling 
Company  under  the  Webb  Law. ' ' 

1919,  John  Walsh,  p.  449— "The  Webb  Law  in  Operation." 

L.  H.  Bissell,  p.  461— "The  Webb  Act;  Its  Legal  Aspects." 

1920,  Houston  Thompson,  p.  64G — "Webb  Law  Developments." 
E.  J.  Bartells,  p.  658— "  The  Webb  Law  in  Operation." 

Edwin  E.  Judd,  p.  664 — "Export  Management  under  the  Webb-Pom- 
erene Act." 

The  text  of  the  Webb-Pomerene  I^aw  is  as  follows: 

Be  it  enacted  hy  the  Senate  and  House  of  Bepresentatives  of  the  United 
States  of  America  in  Congress  assembled,  That  the  words  "export  trade" 
wherever  used  in  this  Act  mean  solely  trade  or  commerce  in  goods,  wares, 
or  nierchundise  exported,  or  in  the  course  of  being  exported  from  the  United 
States  or  any  Territory  thereof  to  any  foreign  nation;  but  the  words  "ex- 


EXPORT  SALES  ORGANIZATION  67 

zation's  salesmen.  The  association  itself  used  composite 
advertising,  listing  all  the  products  manufactured  by  the 
different  companies  and  displaying  their  respective 
trade-marks.  Salesmen  were  instructed  to  be  impartial 
in  selling  their  products  and  not  to  push  one  brand  to 
the  exclusion  of  any  others. 

There  are  undoubtedly  grounds  for  the  statements  of 
some  members  of  the  Reardon  Saw  Company  that  this 
impartiality  has  not  always  been  observed.  Both  com- 
port trade"  sluill  not  be  deeiiied  to  iiu-lude  the  production,  naanufaeture,  or 
selling  for  consumption  or  for  resale,  within  the  United  States  or  any  Terri- 
tory thereof,  of  such  troods,  wares,  or  merchandise,  or  any  act  in  the  course 
of  such  production,  manufacture,  or  selling  for  consumption  or  for  resale. 

That  the  Avords  ' '  trade  within  the  United  States ' '  wherever  used  in  this 
Act  mean  trade  or  commerce  among  the  several  states  or  in  any  Territory  of 
the  United  States,  or  in  the  District  of  Columbia,  or  between  any  such  Terri- 
tory and  another,  or  between  any  such  Territory  or  Territories  and  any 
State  or  States  or  the  District  of  Columl)ia,  or  between  the  District  of 
Columbia  and  any  State  or  States. 

That  the  word  "association"  wherever  used  in  this  Act  means  any  cor- 
poration or  combination,  by  contract  or  otlierwise,  of  two  or  more  persons, 
partnerships,  or  corporations. 

Sec.  2.  That  nothing  contained  in  the  Act  entitled  "An  Act  to  protect 
trade  aiid  commerce  against  unlawful  restraints  and  monopolies,"  approved 
July  second,  eighteen  hundred  and  ninety,  shall  be  construed  as  declaring  to 
be  illegal  an  association  entered  into  for  the  sole  purpose  of  engaging  in 
export  trade  and  actu.ally  engaged  solely  in  such  export  trade,  or  any  agree- 
ment made  or  act  done  in  the  course  of  export  trade  by  such  association, 
provided  such  association,  agreement,  or  act  is  not  in  restraint  of  trade 
Avithin  the  United  States,  and  is  not  in  restraint  of  the  export  trade  of  any 
domestic  competitor  of  such  association;  And  inovidcd  further.  That  such 
association  does  not,  either  in  the  United  States  or  elsewhere,  enter  into  any 
agreement,  understanding,  or  conspiracy,  or  do  any  act  which  artificially  or 
intentionally  enhances  or  depresses  prices  Avithin  the  United  States  of  com- 
modities of  the  class  exported  by  such  association,  or  which  substantially 
lessens  competition  within  the  United  States  or  otherwise  restrains  trade 
therein. 

Sea.  3.  That  nothing  contained  in  section  seven  of  the  Act  entitled  "An 
Act  to  supplement  existing  laws  against  unlawful  restraints  and  monopolies, 
and  for  other  purposes,"  approved  October  fifteenth,  nineteen  hundred  and 
fourteen,  shall  be  construed  to  forbid  the  acquisition  or  ownership  by  any 
corporation  of  the  whole  or  any  part  of  the  stock  or  other  capital  of  any 
corporation  organized  solely  for  the  purpose  of  engaging  in  export  trade, 
and  actually  engaged  solely  in  such  export  trade,  unless  the  effect  of  such 
acquisition  or  ownership  may  be  to  restrain  trade  or  substantially  lessen 
competition  witlxin  the  United  States. 

Sec.  4.  That  the  prohibition  against  "unfair  methods  of  competition" 
and  the  remedies  provided  for  enforcing  said  prohibition  contained  in  the 
Act  entitled  "An  Act  to  create  a  Federal  Trade  Commission,  to  define  its 
powers  and  duties,  and  for  other  purposes,"  approved  September  twenty- 
sixth,  nineteen  hundred  and  fourteen,  shall  be  construed  as   extending  to 


68     PROBLEMS   IN  EXPORT   SALES   MANAGEMENT 

paiiies  have  advertised  that  their  products  are  the  best 
and  unless  the  salesmen  show  some  preference  in  push- 
ing one  brand  a  foreign  customer  is  apt  to  become  con- 
fused over  the  conflicting  statements  of  the  two  firms, 

unfair  methods  of  competition  used  in  export  trade  against  competitors 
engaged  in  export  trade,  even  though  the  acts  constituting  such  unfair  meth- 
ods are  done  without  the  territorial  jurisdiction  of  the  United  States. 

Sec.  5.  That  everj^  association  now  engaged  solely  in  export  trade,  within 
sixty  days  after  the  passage  of  this  Act,  and  every  association  entered  into 
hereafter  which  engages  solely  in  export  trade,  within  thirty  days  after  its 
creation,  shall  file  with  the  Federal  Trade  Commission  a  verified  written 
statement  setting  forth  the  location  of  its  offices  or  places  of  business  and 
the  names  and  addresses  of  all  its  officers  and  of  all  its  stockholders  or  mem- 
bers, and  if  a  corporation,  a  copy  of  its  certificate  or  articles  of  incorpo- 
ration and  by-laws,  and  if  unincorporated,  a  copy  of  its  articles  or  contract 
of  association,  and  on  the  first  day  of  January  of  each  year  thereafter  it 
shall  make  a  like  statement  of  the  location  of  its  offices  or  places  of  business 
and  the  names  and  addresses  of  all  its  officers  and  of  all  its  stockholders  or 
members  and  of  all  amendments  to  and  changes  in  its  articles  or  certificate 
of  incorporation  or  in  its  articles  or  contract  of  association.  It  shall  also 
furnish  to  the  commission  such  information  as  the  commission  may  require 
as  to  its  organization,  business,  conduct,  practices,  management,  and  relation 
to  other  associations,  corporations,  partnerships,  and  individuals.  Any  asso- 
ciation which  shall  fail  so  to  do  shall  not  have  the  benefit  of  the  provisions 
of  section  two  and  section  three  of  this  Act,  and  it  shall  also  forfeit  to  the 
United  States  the  sum  of  $100  for  each  and  every  day  of  the  continuance  of 
such  failure,  which  forfeiture  shall  be  payable  into  the  Treasury  of  the 
United  States,  and  shall  be  recoverable  in  a  civil  suit  in  the  name  of  the 
United  States  brought  in  the  district  where  the  association  has  its  principal 
office,  or  in  any  district  in  which  it  shall  do  business.  It  shall  be  the  duty 
of  the  various  district  attorneys,  under  the  direction  of  the  Attorney  General 
of  the  United  States,  to  prosecute  for  the  recovery  of  the  forfeiture.  The 
costs  and  expenses  of  such  prosecution  shall  be  paid  out  of  the  appropriation 
for  the  expenses  of  the  courts  of  the  United  States. 

Whenever  the  Federal  Trade  Commission  shall  have  reason  to  believe  that 
an  association  or  any  agreement  made  or  act  done  by  such  association  is  in 
restraint  of  trade  within  the  United  States  or  in  restraint  of  the  export 
trade  of  any  domestic  competitor  of  such  association,  or  that  an  association 
either  in  the  United  States  or  elsewhere  has  entered  into  any  agreement, 
understanding,  or  conspiracy,  or  done  any  act  which  artificially  or  intention- 
ally enhances  or  depresses  prices  within  the  United  States  of  commodities 
of  the  class  exported  by  such  association,  or  which  substantially  lessens  com- 
petition within  the  United  States  or  otherwise  restrains  trade  therein,  it 
shall  summon  such  association,  its  officers,  and  agents  to  appear  before  it, 
and  thereafter  conduct  an  investigation  into  the  alleged  violations  of  law. 
Upon  investigation,  if  it  shall  conclude  that  the  law  has  been  violated,  it 
may  make  to  such  association  recommendations  for  the  readjustment  of  its 
business,  in  order  that  it  may  tliereafter  maintain  its  organization  and  man- 
agement and  conduct  its  business  in  accordance  with  law.  If  such  association 
fails  to  comply  with  the  recommendations  of  the  Federal  Trade  Commission, 
said  commission  shall  refer  its  findings  and  recommendations  to  the  Attorney 
General  of  tlie  United  States  for  such  action  thereon  as  he  may  deem  proper. 

For  the  purpose  of  enforcing  these  provisions  tlie  Federal  Trade  Com- 
mission shall  have  all  the  powers,  so  far  as  applicable,  given  it  in  "  An  Act 
to  create  a  Federal  Trade  Commission,  to  define  its  powers  and  duties,  and 
for  other  purposes." 

Approved,  April  10,  1918. 


EXPORT  SALES  ORGANIZATION  69 

romaiii  indecisive,  and  fail  to  place  an  order  for  the 
product  of  either  firm. 

One  group  of  the  directors  of  the  Reardon  Company 
is  more  or  less  of  the  opinion  that  an  export  association 
formed  under  the  Webb  Law  would  work  satisfactorily 
in  the  export  of  grain  or  some  other  raw  material ;  they 
are  even  willing  to  admit  that  in  the  case  of  non-compet- 
ing and  allied  lines  such  an  organization  might  function 
satisfactorily.  The  other  faction  states  that  although 
the  present  arrangement  has  not  worked  out  well  when 
viewed  from  only  this  angle,  still  many  advantages,  such 
as  the  foreign  price  agreement,  have  accrued  from  mem- 
bership in  the  association  and  that  this  arrangement 
would  work  out  satisfactorily  in  the  end  if  the  present 
plan  could  be  modified  and  both  companies  induced  to 
take  a  long-time  view  of  the  development  of  their  trade 
abroad.  After  belonging  to  the  association  for  several 
years  these  men  are  loath  to  have  the  company  go  back 
to  the  old  method  of  relying  for  orders  upon  commission 
houses,  foreign -representatives,  and  one  or  two  of  the 
firm's  o^vn  salesmen.  The  directors,  as  a  body,  are 
therefore  not  in  accord  ^\dtli  each  other  and  would  like 
to  be  advised  as  to  what  steps  to  take  to  remedy  the 
present  difficulty. 

Problem  12 

WiNTHROP  Company — Cooperative  Export  Department; 
Combination  Export  Manager* 

The  AVinthrop  Rubber  Company  recently  received  a 
proposal  from  a  well-known  export  manager  that  it  join 
with  four  other  manufacturers  of  allied  lines  in  estab- 
lishing a  cooperative  export  department  in  New  York 
City.  This  firm  exported  last  year  about  $92,000  worth 
of  women's  rubber  gloves  and  rubber-soled  shoes  through 
coimnission  and  export  houses.     The  company  is  small 

*See  Wyman,  Export  Merchandising,  Cliapter  IX ;  Hough,  Practical 
Exporting,  pages  105-108;  also  Export  Trade  and  Exporters'  Eeview, 
Feb.  28,  1021,  page  24. 


70     PROBLEMS   IN  EXPORT  SALES   MANAGEMENT 

and  has  never  develo])ed  an  export  department,  since  it 
was  not  thonght  worth  wliile  because  of  tlie  firm's  small 
volume  of  foreign  l)usiness.  Consequently  this  work  has 
been  handled  by  the  domestic  sales  organization  with 
more  or  less  indifference,  and  mistakes  in  tilling  orders, 
making  out  the  proper  papers,  and  securing  translations 
have  not  been  infrequent. 

By  forming  a  cooperative  export  department  the  par- 
ticipating companies  "would  divide  the  cost  of  a  high  sal- 
aried export  manager  and  export  office.  The  personnel 
of  such  a  department  would  be  much  better  than  the  com- 
pany could  secure  alone,  since  the  cooperative  depart- 
ment could  afford  to  pay  higher  salaries.  Such  an  organ- 
ization would  also  be  able  to  employ  experts  to  handle 
merchandising,  freighting,  accounting,  translating,  grant- 
ing of  credit,  and  settling  of  claims.  By  operating  alone, 
however,  the  company  could  not  maintain  a  New  York 
office  with  the  advantages  of  securing  mail  a  day  or  two 
sooner,  investigating  the  adequacy  of  proper  packing  and 
stowing  of  the  goods,  and  in  making  last-minute  correc- 
tions. 

The  allied  lines  of  men's  and  women's  felt  slippers, 
rubbers,  shoes,  and  boots  manufactured  by  the  companies 
with  which  the  Winthrop  Company  was  to  cooperate 
have  similar  trade  outlets.  Consequently  another  under- 
taking that  the  cooperative  export  department  could 
carry  on,  which  one  manufacturer  could  not  atford  to 
finance  alone,  was  that  of  making  a  market  analysis  in 
foreign  countries  for  their  product. 

A  cooperative  export  department  is  different  from  an 
organization  under  the  Webb  Law,  since  a  manufacturer 
does  not  have  to  deal  through  a  third  party.  The  manu- 
facturer does  not  lose  his  identity  at  any  time ;  all  letters 
to  his  customers  are  written  on  his  own  letterhead  and 
signed  by  the  head  of  the  cooperative  export  department 
as  export  manager  for  each  company.  The  use  of  such 
an  organization  would  not  in  any  way  change  the  present 
methods  of  handling  foreign  orders,  since  it  is  intended 
to  be  used  as  an  adjunct  to  commission  houses  and  other 


EXPORT  SALES  ORGANIZATION  71 

agencies  already  in  operation  ratlier  than  to  displace 
them. 

Based  on  last  year's  foreign  sales,  it  has  been  esti- 
mated that  it  would  cost  the  Winthrop  Company  about 
$250  a  month  for  its  share  of  the  expense  of  the  coop- 
erative export  department.  This  would  not  include  an 
extensive  market  investigation  or  other  special  service 
which  would  have  to  be  financed  seyjarately.  At  present 
the  managers  of  the  firm  are  skeptical  of  the  ability  of 
one  export  manager  to  serve  so  many  interests.  Fur- 
thermore, unless  all  manufacturers  agree  to  carry  on 
trade  investigations,  they  are  convinced  that  it  would  be 
impracticable,  since  the  cost  would  be  too  high  for  one 
or  two  companies  to  stand  alone.  Although  every  manu- 
facturer has  the  privilege  of  withdra\^ing  at  any  time 
and  returning  to  his  old  method  of  exporting,  there  is 
also  the  possible  danger  that  such  a  plan  might  leave 
one  or  two  companies  financing  the  ofl&ce. 

Should  the  Winthrop  Company  join  in  forming  a 
cooperative  export  department?  If  not,  could  the  Win- 
throp Company  export  direct?  What  type  of  organiza- 
tion would  be  advisable? 


Problem  13 

Motor  Accessories  Corporation  and  Forest  Machine 

Company — Adapting  Export  Organization  to 

Product  and  Resources 

(a)  The  Motor  Accessories  Corporation,  which  makes 
a  line  of  electrical  fittings,  portable  searchlights,  and 
similar  automobile  accessories,  possesses  a  line-and-statf 
organization  of  which  the  chief  active  official  is  the  gen- 
eral manager,  to  whom  report  the  plant  superintendent, 
the  factory  superintendent,  and  the  sales  manager. 
These  officials  meet  daily  as  a  planning  committee.  The 
annual  sales  of  the  concern  amount  to  $500,000.  The 
sales  organization  of  the  company  consists  of  the  sales 
manager  Avith  four  assistants  in  the  home  office,  who 


72     PROBLEMS   IN  EXPORT  SALES  MANAGEMENT 

have  been  assigned  various  duties — one  in  charge  of 
advertising,  another  in  charge  of  correspondence,  a  third 
credits,  and  the  fourth  a  general  assistant — and  six 
traveUng  salesmen  covering  the  six  sales  districts  into 
Avhich  the  United  States  is  divided.  The  company  sells 
exclusively  to  automobile  accessory  jobbers,  mail-order 
houses,  and  automobile  manufacturers.  Its  advertising 
is  confined  to  automobile  trade  journals,  which  are  read 
by  jobbers. 

Although  many  of  the  accessory  jobbers  have  retail 
stores  of  their  own,  the  Motor  Accessories  Corporation 
has  never  felt  it  possible  to  go  directly  to  the  retailer 
because  of  the  great  expense  entailed  and  the  small 
resources  of  the  company.  Nevertheless,  the  company  is 
not  fully  satisfied  with  its  jobbing  representatives  and 
looks  with  longing  toward  the  foreign  field  as  one  offer- 
ing a  more  profitable  market.  While  it  has  been  sug- 
gested that  consumer  advertising  might  bring  domestic 
jobbers  in  line,  the  officials  of  the  company  feel  that  the 
amount  which  they  could  appropriate  for  direct  con- 
sumer advertising  would  be  so  small  as  to  have  little 
effect,  while  larger  concerns  could  easily  overshadow 
such  advertising.  Tiie  officers  of  the  company  wonder 
whether  the  $5,000,  which  might  be  appropriated  during 
the  first  year  for  the  building  of  foreign  sales,  w^ould  be 
sufficient  to  bring  returns  in  export  business  within  a 
reasonable  length  of  time. 

If  it  is  decided  to  undertake  direct  export,  what  organ- 
ization measures  would  be  recommended  under  the  con- 
ditions? 

.  (b)  The  Forest  Machine  Company  manufactures  forty 
different  types  of  w^oodworking  machines  including  plan- 
ers, surfacers,  niolders,  antoniatic  knife  grinders,  and 
trim  saws.  Machines  range  in  price  from  $1,000  to 
$9,500,  vary  in  weight  from  2,000  to  30,000  pounds,  and 
are  sold  to  saw-mills,  planing  mills,  furniture  factories, 
and  other  manufacturers  of  wood  products. 

In  the  domestic  market  the  company  sells  mainly 
through  its  o\vi\  branches,  but  up  to  the  present  has  done 


EXPORT  SALES  ORGANIZATION  73 

no  direct  foreign  business  though  the  excellence  of  its 
machines  and  the  reputation  it  has  achieved  in  the  do- 
mestic market  have  undoubtedly  been  the  reasons  for 
the  orders  which  it  has  not  infrequently  received  from 
export  houses  in  New  York.  These  orders  have  been 
tilled  upon  the  same  terms  as  those  prevailing  in  the  case 
of  domestic  customers.  The  increase  in  the  volume  of 
sales  to  such  houses,  the  drop  in  domestic  demand,  and 
other  factors  have  caused  the  board  of  directors  to  de- 
cide to  establish  a  direct  exporting  organization.  The 
company  is  in  good  financial  condition,  and  any  amount 
necessary  for  rapid  development  of  a  permanent  and 
profitable  business  can  be  appropriated  from  surplus 
until  such  time  as  the  foreign  business  can  recoup  the 
developmental  expense. 

An  export  counselor  has  been  asked  to  propose  an  or- 
ganization plan.  What  type  of  organization  should  he 
recommend  1 


Problem  14 

Cotton  Braid  Associates— Division  of  Sales  Organization 
By  Territory  or  By  Goods 

The  Cotton  Braid  Associates  is  a  corporation  recentlv 
formed  by  a  number  of  manufacturers  to  further  the  sale 
of  their  products  abroad.  Their  merchandise  numbers 
over  3,800  different  items  of  findings,  including  a  com- 
plete line  of  tapes,  braids,  beltings,  suspender  webbing, 
suspender  buckles  and  metal  parts,  elastics,  shoe  laces 
and  shoe  linings,  thread  of  all  kinds,  ribbons,  and  many 
articles  of  a  similar  nature.  In  addition  to  its  own  sales 
force  who  will  call  on  the  trade,  the  company  will  deal 
through  manufacturers '  agents  in  order  to  have  a  repre- 
sentative on  the  ground  at  all  times.  It  is  intended  to 
sell  these  articles  direct  to  the  consumer  in  Europe  and 
Latin  America,  sales  being  made  to  small  retailers  as 
well  as  to  manufacturers,  large  department  stores,  and 
import  houses. 


74     PROBLEMS   IN   EXPORT  SALES   MANAGEMENT 

Because  of  the  large  number  of  diversified  items  and  the 
different  groups  of  customers  to  which  the  corporation 
intends  to  sell,  the  Cotton  Braid  Associates  are  facing  the 
problem  of  whether  they  should  attempt  a  sales  division 
by  territories  or  by  products.  To  give  one  salesman  3,800 
items  to  sell  is  almost  certain  to  result  in  favorite  lines 
being  pushed  while  others  are  almost  forgotten.  Some  of 
these  lines  may  be  sold  to  clothing  manufacturers,  others 
to  suspender,  garter,  or  shoe  manufacturers,  and  still 
others  to  department  stores  and  general  retailers.  Each 
class  of  customers  has  liis  own  problems  to  consider  and 
rarely  can  a  salesman  be  found  capable  of  selling  ribbons 
and  tapes  to  a  department  store  in  the  morning,  shoe  laces 
and  linings  to  a  shoe  manufacturer  in  the  early  afternoon, 
and  braids  and  other  findings  to  a  clothing  manufacturer 
still  later  in  the  day. 

In  granting  exclusive  agencies  to  handle  its  products, 
the  corporation  is  faced  with,  a  similar  problem.  A  do- 
mestic sewing  machine  company  might  have  a  large  ware- 
house in  Mexico  City  and  grant  exclusive  agency  rights  to 
manufacturers '  representatives  in  the  surrounding  towns ; 
but  if  the  Cotton  Braid  Associates  should  open  a  ware- 
house in  a  foreign  city,  carrying  almost  four  thousand  dif- 
ferent items,  it  would  have  thousands  of  dollars  tied  up 
in  surplus  stocks.  As  for  granting  an  exclusive  agency 
for  the  entire  line  to  one  representative  in  each  district, 
the  corporation  may  be  faced  with  the  fact  that  no  one 
representative  can  cover  all  classes  of  customers  any  bet- 
ter than  could  its  own  sales  force.  For  these  reasons  it 
has  been  suggested  that  the  Cotton  Braid  Associates 
should  divide  their  sales  organization  according  to  the 
product  sold>  so  that  one  group  of  salesmen  and  man- 
ufacturers' representatives  would  handle  the  retail  trade, 
another  the  clothing  manufacturers,  still  another  shoe, 
suspender,  and  garter  manufacturers,  and  a  fourth  the 
im]oort  and  wholesale  houses. 

Although  on  the  surface  the  division  of  the  sales  or- 
ganization according  to  products  appears  to  be  satisfac- 
tory, it  has  a  number  of  disadvantages  which  are  largely 


EXPORT  SALES  ORGANIZATION  75 

overcome  by  a  division  according  to  the  territory  covered. 
In  the  first  place,  many  of  the  same  classes  of  merchan- 
dise are  sold  to  retailers,  wholesalers,  and  manufacturers 
so  that  these  different  lines  overlap  and  all  salesmen 
would  be  required  to  carry  a  number  of  the  same  products. 
Althouoh  industries  are  frequently  congregated  in  large 
centers,  all  classes  of  customers  are  distributed  over  mde 
territories  so  that  much  of  the  same  ground  would  be  cov- 
ered by  all  salesmen.  Since  it  has  been  estimated  that  the 
expenses  of  the  company's  foreign  salesmen  average 
about  $25  a  day,  it  is  evident  that  any  unnecessary  dupli- 
cation of  effort  would  be  an  expensive  error. 

To  lower  the  sales  cost  it  is  planned  to  establish  local 
representatives  wherever  possible,  using  the  company's 
salesmen  to  assist  in  introducing  the  line,  to  help  the 
agent  close  difficult  orders,  and  to  instruct  these  repre- 
sentatives in  aggressiv^e  selling  methods.  Under  the  plan 
of  dividing  the  sales  organization  according  to  products 
it  would  be  necessary  to  select  several  manufacturers' 
representatives  in  each  city  or  district,  each  of  whom 
would  distribute  a  part  of  the  complete  line.  Although  it 
is  almost  always  possible  to  tind  at  least  one  first-class 
manufacturers'  representative,  frequently  it  is  impossible 
to  find  several  agents  in  one  town  who  are  equally  good. 
Since  the  entire  line  would  thus  be  divided  among  several 
different  agents,  the  amount  of  merchandise  sold  by  any 
one  representative  would  scarcely  be  sufficient  to  arouse 
his  interest  in  pushing  the  Associates '  goods  and  the  con- 
trol of  sales  efforts  would  be  rendered  difficult. 

In  contrast  to  this  situation,  if  the  sales  divisions  were 
based  upon  territories,  one  successful  agent  would  be 
selected  in  each  district ;  he  would  be  given  the  exclusive 
rights  of  merchandise  in  his  territory  and  held  strictly  ac- 
countable for  results  by  one  of  the  company's  salesmen, 
who  in  tuni  would  be  held  responsible  for  the  volume  of 
sales  in  the  country  to  which  he  was  assigned.  Overlap- 
ping of  lines  and  duplication  of  effort  would  thus  be 
avoided,  expenses  would  be  cut  to  a  minimum,  and  the 


76     PROBLEMS  IN   EXPORT  SALES   MANAGEMENT 

control  of  sales  efforts  would  be  rendered  easier  through 
the  definite  fixing-  of  responsibility  for  results  upon  one 
man  in  each  territory. 

Problem  IS 

American  Export  Corporation — Organization  from  Territory 
OR  Product  Standpoint 

The  American  Export  Corporation  was  formed  during 
the  war  for  the  purpose  of  buying  and  shipping  food  sup- 
plies to  the  allies.  Later  the  export  of  grain,  hay,  and 
other  forage  for  array  horses  proved  profitable  and  a 
grain  and  forage  department  was  formed  entirely  sep- 
arate from  the  food  supply  di^"ision.  At  this  time  South 
America,  which  was  cut  oft"  from  receiving  materials  from 
Europe,  was  in  need  of  many  chemicals  and  chemical 
compounds  and  a  separate  chemical  department  was  ac- 
cordingly established.  After  the  war  the  food  supply  and 
forage  departments  were  discontinued,  but  a  demand  for 
wire  and  cable  in  the  Latin  American  countries  and  China 
for  lines  of  communication  and  aero  tramways,  as  well  as 
for  other  uses,  led  to  the  establishment  of  a  wire  and  cable 
department.  There  was  also  a  growing  demand  for  farm 
machinery  in  parts  of  Europe  and  in  Argentina,  Para- 
guay, Uruguay,  and  Brazil,  and  again  a  distinct  depart- 
ment was  organized  to  handle  this  line. 

Although  these  departments  were  all  parts  of  the 
American  Export  Corporation  and  were  under  the  same 
management  with  headquarters  in  New  York,  they  grew 
up  more  or  less  individually,  almost  as  separate  com- 
panies as  far  as  foreign  distribution  was  concerned.  No 
branch  offices  were  maintained  and  salesmen  were  sent 
out  by  the  ditferent  departments  from  the  New  York  of- 
fice. With  the  falling  off  in  exports  after  the  war,  losses 
were  incurred  and  it  was  evident  that  some  change  must 
be  made  to  avoid  the  excessive  costs  of  duplication. 
Nevertheless  no  change  has  been  attempted  to  date  be- 
cause of  the  opposition  of  the  heads  of  the  different  de- 
partments, who  are  convinced  that  only  a  steel  man  can 


EXPORT  SALES  ORGANIZATION  77 

sell  or  handle  steel  and  onl}^  a  chemical  expert  can  handle 
chemical  compomids. 

The  first  plan  submitted  to  the  directors  of  the  corpora- 
tion is  absolutely  opposed  to  the  present  system.  Each 
country  or  group  of  countries  would  be  organized  into 
zones  according  to  the  following  basis : 

Zone  1  Czecho-Slovakia 

Jugo  Slavia 

Zone  2  France 

Zone  3  Argentina 

Zone  4  Brazil 

Zone  5  Chile 

Peru 

Zone  6  Venezuela 

Colombia 
Ecuador 

Zone  7  China 

A  branch  sales  office  which  would  be  established  in 
each  zone  would  have  at  its  head  a  man  thoroughly  ac- 
quainted with  the  customs,  languag'e,  and  needs  of  the 
people  in  his  territory.  This  branch  manager  would  be 
directly  responsible  to  the  general  manager  in  New  York 
for  results  in  his  zone.  The  salesmen  would  be  selected 
because  of  their  familiarity  with  the  market  and  knowl- 
edge of  the  export  trade  rather  than  for  any  expert 
knowledge  of  the  product.  Instead  of  the  organization 
being  made  up  of  several  watertight  departments  each 
concerned  with  selling  its  own  product,  it  would  be  com- 
posed of  merchandise  men  with  a  thorough  knowledge  of 
export  methods,  organized  into  zones  according  to  the 
territory  which  they  were  to  cover.  Although  these  sales- 
men would  have  but  little  technical  knowledge  of  the  prod- 
uct which  they  sold,  it  was  pointed  out  that  the  great  ma- 
jority of  the  exports  of  the  company  were  for  ordinary 
commercial  Uses  that  did  not  require  highly  technical 


78     PROBLEMS   IN   EXPORT   SALES   MANAGEMENT 

training  to  sell,  altliougli  the  classes  of  customers  buying 
each  of  these  products  varied  widely. 

The  other  plan  that  is  contemi)lated  is  the  combination 
of  the  present  method  with  the  zone  organization.  Each 
zone  would  have  at  its  head  a  capable  merchandise  man 
thoroughly  familiar  witli  market  conditions  in  his  zone, 
experienced  in  export  methods  and  located  at  a  strategic 
center.  The  salesmen  under  him,  however,  would  be  ex- 
perts, each  highly  trained  i-n  his  own  particular  line.  In 
the  handling  of  sales,  securing  of  orders,  and  building  up 
of  a  permanent  clientele  they  would  be  responsible  di- 
rectly to  the  zone  manager,  who  would  be  a])le  to  make 
decisions  with  a  full  knowledge  of  local  conditions.  In 
reporting  changes  demanded  by  customers  and  the  gen- 
eral tendency  of  each  particular  trade,  the  salesmen 
would  report  through  the  zone  manager  to  their  depart- 
ment heads  in  New  York  City.  In  this  manner  the  mer- 
chandise and  sales  problems  would  be  handled  by  a  mer- 
chandise expert,  and  technical  questions  and  research 
work  w^ould  be  handled  l)y  men  with  technical  training, 
although  this  plan  would  require  a  larger  staff  of  men 
and  be  more  expensive  to  maintain  than  the  organization 
provided  by  the  first  plan. 

Which  pkm  should  be  adopted  by  the  American  Export 
Corporation  ? 


Problem  16 

The  Export  Executive 

A  prominent  export  manager,  in  discussing  the  rela- 
tion of  the  export  manager  to  the  domestic  sales  man- 
ager, in  Export  Trade  and  Exporters'  Review,  says  that 
a  capable  export  manager  cannot  specialize  on  any  one 
line  of  work,  but  must  be  familiar  in  a  general  way  with 
every  division  of  the  business. 

"He  must  know  how  to  develoj)  foi'(M<>u  sales,  he  inust  be 
conversant  with  foreign  advertising]^  problems  and  nnderstand 
foreign  credits  and  collections.     lie   shonld  know   thoroughly 


EXPORT  SALES  ORGANIZATION  79 

commercial  geography,  international  law  and  foreign  tariffs. 
He  must  know  the  technique  of  handling  exj^ort  shipments  and 
must  be  endowed  with  an  unusual  amount  of  patience  in  reach- 
ing an  understanding  of  the  psychology  of  the  foreign  buyers. 

Seldom  does  a  domestic  official  or  executive,  whose  mind  is 
occupied  principally  with  domestic  conditions,  know  very  much 
about  many  problems  that  exist  abroad.  As  an  example :  the 
domestic  sales  manager's  problems  are  to  market  the  merchan- 
dise manufactured  by  his  company  in  the  United  States  through 
the  customary  channels  employed  by  the  line  he  is  handling. 
It  may  be  marketing  through  jobbers,  through  exclusive  dealers, 
direct  salesmen  or  by  mail.  His  problems  are  the  same  in  New 
York  State  as  thej^  are  in  Illinois.  The  customs  of  the  people 
are  alike,  the  language  is  the  same,  and  the  general  sales  methods 
are  uniform.  The  domestic  credit  man  can  pursue  the  same 
methods  in  extending  credit  or  making  collections  in  Louisiana 
as  in  Maine.  He  can  observe  the  uniform  terms  laid  down  by 
the  house,  and  when  confronted  with  a  particularly  difficult 
collection  problem,  he  may  seek  the  advice  of  his  local  attorney 
or,  perhaps,  refer  the  collection  to  his  traveling  salesman  or 
branch  office  on  the  ground.  The  domestic  traffic  manager  ships 
his  goods  by  rail  with  the  exception  of  coastwise  steamers,  and 
after  placing  the  merchandise  on  the  freight  cars  or  delivering 
it  to  the  express  company,  his  troubles  are  ended.  The  advertis- 
ing manager,  in  turn,  may  develop  one  type  of  advertising  and 
secure  a  tremendous  circulation  in  the  United  States  through 
magazines  and  newspapers. 

Now,  let  us  turn  to  the  export  manager.  We  find  that  his 
problems  are  considerably  multiplied.  Sales  methods  differ  in 
various  parts  of  the  world.  In  some  countries  he  may  establish 
branch  offices ;  in  other  countries  he  may  find  it  expedient  to  sell 
through  jobbers  who  will  distribute  to  the  local  dealers;  again, 
there  are  countries  or  cities  where  exclusive  agencies  may  be 
made,  and  in  some  out-of-the-way  places  he  finds  it  necessary 
to  solicit  business  by  mail.  Only  the  larger  institutions  are 
able  to  employ  sufficient  traveling  representatives  to  represent 
properly  the  line  in  foreign  fields.  He  finds  many  varying  types 
of  peoples  and  must  handle  the  Latin  in  a  different  manner  from 
the  Scandinavian  or  the  Oriental.  His  advertising  problems 
are  complex  because  of  the  different  types  of  people  he  attempts 
to  reach,  the  many  languages  that  are  used  in  various  parts  of 
the  world,  the  many  classes  of  periodicals  and  the  difficulty  in 
selecting  those  that  are  of  the  right  character  in  which  to"^  ex- 
ploit his  line.  He  must  find  many  sources  from  which  to  secure 
information  and  trade  tips.  He  does  not  have  the  same  facili- 
ties for  obtaining  credit  information  that  are  found  in  this 
country  and  must  operate  entirely  along  different  lines,  not  only 


80     PROBLEMS   IN   EXPORT  SALES   MANAGEMENT 

in  passing  his  credits  but  in  making  his  collections.  His  traffic 
problems  are  entirely  different  from  domestic,  as,  after  the 
goods  arrive  at  the  seaboard  from  the  factory,  he  mnst  exercise 
a  great  deal  of  care  in  properly  haiulliiig  shipments  or  the  pos- 
sibility of  financial  loss  occnrs.  While  he  may  have  an  experi- 
enced traffic  man  to  handle  the  detail,  the  export  manager 
shonld  be  familiar  with  commercial  geography,  steamship  lines, 
methods  of  transportation  in  foreign  countries,  export  packing, 
nmrine  insurance,  tariffs,  consular  regulations  and  many  other 
details. 

It  is  easily  seen,  therefore,  tliat  the  export  manager  is  really 
a  general  manager  of  the  foreign  division  of  the  business,  and 
in  his  own  dominion  must  be  as  versatile  and  well  posted  as  the 
general  manager  of  the  entire  business.  In  order  that  the  ex- 
port manager  secure  the  best  results,  he  should  not  be  under 
the  control  or  subject  to  the  rules  and  regulations  of  the  domestic 
executives.  He  should  be  given  full  authority  to  conduct  export 
business  independently  and  shoidd  stand  or  fall  upon  his  own 
record. ' ' 

To  what  extent  is  the  contrast  drawn  between  domestic 
and  export  sales  managers  justified? 


EXPORT  SALES  ORGANIZATION  81 

\j     Problem  17 

Hardee  Hat  Company — Developing  Export  Manager  from 
Own  Organization  versus  Securing  Manager  Outside 

The  Hardee  Hat  Company  is  confronted  with  the  prob- 
lem of  securing  an  export  manager  who  can  build  up  an 
export  department.  The  decision  to  relieve  the  domestic 
sales  manager  of  the  duty  of  handling  foreign  orders  was 
reached  almost  two  years  ago,  but  no  steps  were  taken  to 
bring  this  decision  to  realization.  In  fact,  matters  would 
probably  have  continued  to  run  in  the  old  way  had  not  the 
firm  come  to  realize  the  need  for  other  markets  in  order 
to  increase  its  sales  and  to  stabilize  its  production  load. 

For  several  years  this  firm  has  been  filling  a  small  num- 
ber of  foreign  orders,  most  of  which  have  been  sent  in  by 
commission  houses  and  a  few  manufacturers'  agents  who 
have  been  representing  the  company  in  Mexico,  Cuba, 
and  parts  of  South  America  and  Australia.  The  company 
has  never  really  tried  to  secure  large  sales  abroad,  being- 
content  to  feel  out  the  market  in  a  general  way  and  to  use 
the  few  orders  it  did  secure  to  fill  in  the  gaps  between  do- 
mestic orders.  Mistakes  have  occurred  from  time  to  time 
because  it  has  been  necessary  to  have  orders  received  in 
Spanish  interpreted  by  a  translator  who  was  not  familiar 
with  the  hat  business,  and  the  production  and  shipping 
departments  have  occasionally  been  careless  in  comply- 
ing with  foreign  specifications.  As  a  result  the  com- 
pany's export  business  cannot  be  considered  highty  suc- 
cessful. 

In  the  future  it  is  planned  to  assist  commission  houses 
and  manufacturers '  agents  in  securing  foreign  orders  by 
using  a  small  amount  of  foreign  advertising,  but  the  com- 
pany wishes  to  secure  an  export  manager  to  build  up  its 
export  business  efficiently  instead  of  practically  ignorino- 
it  as  has  been  done  in  the  past.  Two  alternatives  are  be- 
ing considered:  should  an  export  manager  from  within 
the  organization  be  developed  or  should  the  services  of 
an  outsider  who  is  experienced  in  the  foreign  field  be 
secured? 

Mr.  Daniels,  one  of  the  sales  manager's  assistants,  is 
extremely  desirous  of  getting  into  export  work.     He  is 


82      PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

a  college  graduate,  about  twenty-eight  years  old,  and  lias 
been  with  the  company  for  almost  six  years.  He  served  in 
France  with  the  American  army  during  the  war,  but  aside 
from  this  has  never  been  outside  of  the  United  States. 
He  speaks  P'rench  and  has  a  smattering  of  German,  Be- 
fore being  called  off  the  road  to  act  as  an  assistant  to  the 
sales  manager,  Mr.  Daniels  had  been  a  successful  sales- 
man in  the  domestic  field  and  is  familiar  with  the  com- 
pany's product  and  the  limitations  of  its  factory.  He 
has  proved  to  be  capable  in  his  present  position,"  is  am- 
bitious to  get  ahead,  and  by  making  him  export  manager 
the  company  would  insure  his  remaining  with  the  firm. 

Of  the  men  outside  the  company's  organization  who 
are  being  considered  for  the  position,  Mr.  Livermore  is 
the  most  promising.  He  is  a  man  of  about  thirty-two 
years  of  age,  is  a  high  school  graduate  and  has  spent  the 
greater  part  of  twelve  years  as  a  textile  salesman  in  Mex- 
ico, Cuba,  and  parts  of  South  America.  He  has  had  no 
experience  in  selling  hats,  however,  and  is  not  familiar 
with  the  company's  product.  Because  of  his  experience 
Mr.  Livermore  understands  the  requirements  of  the  ex- 
port business  and  has  an  intimate  knowledge  of  the  mar- 
kets in  the  countries  in  which  he  has  been  a  salesman.  He 
speaks  Spanish  fluently;  his  w^ife  is  a  South  American; 
and  he  is  thoroughly  familiar  and  in  sympathy  with  the 
buying  customs  and  habits  of  Latin  America.* 

*The  qualifications,  duties  and  responsibilities  of  the  export  manager 
are  discussed  in  Hough,  Practical  Exporting,  pages  97-103;  105-108; 
in  Vedder.  American  Methods  in  Foreign  Trade,  Chapter  VI;  in  Wyman, 
l']xport  Merchandising,  Chapter  VIII;  and  in  the  following  periodicals: 

The   World's  Marlcets. 

Mar.    1919,   p.    21 — "The    Export    Manager — A    Candid    Criticism." 

Apr.  1919,  p.  25 — "The  Export  Manager — -An  American  Asset." 

Apr.    1919,  p.  26 — "The  Export  Manager — A  Critic  Answered." 

June  ]919,  p.   17 — "Should  the  Export  Manager  Travel  Abroad?" 

Sept.   1919,  p.   32 — "The  Travel   Problem   Again." 

Nov.  1920,  p.  41 — "Practical  Exporting." 

Dec.  1920,  p.  26— "Practical   Ilxporting. " 

Jan.  1921,  p.  28— " Practical  Exporting." 

Apr.   1921,  p.  34 — "Exporting  Managers'   Convention." 

Export  Trade  and  Exporters'  Review. 

Feb.  28,  1921,  p.  24 — "The  'Combination  Export  Manager'." 
Mar.  19,  1921,  p.  11 — "What  I  Expect  from  My  Export  Manager." 
July  2,  1921,  p.  8 — "The  Export  Manager's  Authority." 


EXPORT  SALES  ORGANIZATION  83 

Which  man  should  the  Hardee  Hat  Company  select  as 
an  export  manager?  If  neither  candidate  is  desirable, 
how  should  other  candidates  be  secured  ? 


Problem  18- 

Williamson  Company — Employing  Foreign  Regulation  Expert 

Many  foreign  governments  depend  upon  customs  duties 
on  exports  and  imports  for  a  large  portion  of  their  rev- 
enue and  consequently  have  many  laws  and  regulations 
governing  the  admission  of  merchandise  to  their  country. 
In  the  more  recently  developed  countries  in  South  Amer- 
ica, where  hundreds  of  tons  of  merchandise  are  imported 
every  year,  it  is  important  that  a  standard  method  of 
marking  be  followed.  In  Chile,  for  instance,  the  law  re- 
quires that  all  goods  shipped  into  the  country  have  the 
name  and  address  of  the  consignee  stencilled  on  the  out- 
side of  the  container  instead  of  being  marked  ^^^th  a 
brush  or  otherwise.  In  case  an  American  firm  fails  to 
obey  this  law,  the  customer  who  buys  the  goods  must  pay 
a  fine.  Recently  a  Canadian  law  was  passed  requiring 
that  any  package  imported  into  the  Dominion  show  on 
the  outside  the  product  which  it  contains  and  the  country 
in  which  it  was  made.     The  regulations  of  the  different 

Aug.  6,  1921,  p.  9— "What  an  Export  Manager  Should  Know." 
Aug.  20,  1921,  p.  9— "What  an  Export  Manager  Should  Know." 
Sept.  3,  1921,  p.  11— "What  an  Export  Manager  Should  Know." 
Sept.  17,  1921,  p.  11— "What  an  Export  Manager  Should  Know." 
Oct.   8,   1921,  p.  8— "What  an   Export  Manager   Should   Know." 

While  the  information  required  for  deeision  differs  from  that  in  domestic . 
sales  transactions,  it  may  Avell  be  argued  that  the  qualifications  of  a  good 
export  sales  manager  are  the  same  as  those  of  a  good  domestic  sales  mana- 
ger. It  may  be  further  argued  that  the  desirable  qualifications  of  a  sales 
executive  are  the  same  as  those  of  ;uiy  business  executive.  In  this  connec- 
tion the  statement  of  Mr.  Gowin  in  his  book,  TJie  Selection  and  Training 
of  the  Business  Executive,  regarding  the  chief  requisites  of  the  executive 
is  of  interest.  On  the  basis  of  investigation  carried  on  among  276  firms, 
he  found  that  (omitting  education  and  experience)  the  chief  requisites 
in  order  of  rank  were  judgment,  initiative,  integrity,  organizing  ability, 
health,  perseverance,  aggressiveness,  openmindedness,  cooperativeness. 
competitiveness,  control  of  emotions,  refinement,  appearance,  and  sense  of 
humor.  It  is  evident  that  the  r;uikiiig  miglit  be  changed  for  particular 
openings,  although  the  change  would  be  one  of  degree  rather  than  one 
of  kind. 


84     PROBLEMS   IN   EXPORT   SALES  MANAGEMENT 

countries  are  frequently  changed ;  old  ones  are  abolished 
and  new  ones  take  their  place.  It  is  important  therefore 
that  a  manufacturer  selling  goods  in  foreign  countries 
keep  in  touch  with  the  customs  regulations  and  laws  gov- 
erning exports. 

When  the  AVilliamson  Company  first  entered  foreign 
trade,  it  was  comparatively  easy  to  keep  track  of  these 
regulations,  since  it  exported  only  to  Cuba,  Mexico,  "West 
Indies,  and  Cauada,  Moreover,  with  only  five  people 
handling  the  office  and  routine  of  the  export  department, 
each  person  could  easily  keep  more  or  less  familiar  with 
new  regulations.  In  selling  roofing  paper,  the  chief  prod- 
uct of  the  Williamson  Company,  there  is  a  seasonal 
variation  in  sales,  depending  upon  the  building  season  in 
each  country.  Usually,  therefore,  the  export  department 
was  able  to  concentrate  on  one  or  two  countries  at  a  time. 

Now,  however,  the  foreign  business  has  grown,  until 
twenty  persons  are  employed  in  the  export  department. 
The  company  sells  its  roofing  paper  to  New  Zealand, 
Australia,  New  South  Wales,  Japan,  Java,  Philippines, 
Cuba,  Mexico,  Central  and  South  America,  Bermuda, 
Gold  Coast  Colony  in  Africa,  Sweden,  Holland,  England 
and  Canada.  The  export  department  must  therefore  be- 
come familiar  with  many  more  regulations  than  previ- 
ously. In  addition,  since  government  revenues  have 
fallen  oif,  new  customs  regulations  and  laws  are  being 
jjassed  in  a  number  of  foreign  countries.  Because  it  is 
more  difficult  to  keep  the  larger  force  of  the  export  de- 
partment in  touch  with  these  latest  requirements,  occa- 
sionally mistakes  liave  occurred  because  the  proper  care 
was  not  taken  in  prejjaring  a  shipment  and  in  filing  the 
customs  declaration  and  other  documents  according  to 
tlie  regulations.  It  is  ])i'o])ose(l  tlierefore  that  a  foreign 
track'  specialist  sliouhl  ))e  eni])loyed,  wliose  main  work 
would  be  to  keep  iiil'oi-ined  on  all  export  regulations  of 
Foreign  count I'ics,  and  to  see  tli^d  the  instructions  for 
packing,  shipping,  billing,  and  other  documentary 
routine  confoiin  to  these  regulations. 

Thei'e  lias  been  considerable  ol)jection  to  the  employ- 
ment of  such  a  specialist  on  the  part  of  a  immber  of  the 


EXPORT  SALES  ORGANIZATION  85 

people  in  the  export  department.  They  say  that  it  is  a 
fine  thing  to  speciaUze  in  packing-  merchandise,  since  one 
man  can  wrap  the  goods  in  heavy  paper  and  another  nail 
up  the  crate ;  still  another  can  stencil,  and  the  fourth  can 
load  the  goods  into  the  freight  car.  In  the  case  of  em- 
ploying a  specialist  on  exports,  however,  the  whole  or- 
ganization should  thoroughly  understand  export  regula- 
tions. If  this  information  is  concentrated  in  the  hands  of 
one  man  all  the  others  in  the  department  will  no  longer 
consider  it  their  business  to  keep  in  touch  with  the  de- 
velopments in  the  foreign  field,  and  in  case  the  specialist 
on  regulations  is  absent  or  leaves  the  Williamson  Com- 
pany to  accept  a  position  elsewhere,  there  would  be  no 
one  in  the  department  who  would  be  acquainted  with  these 
regulations. 

Furthermore,  exporting  manufacturers  generally  do 
not  use  such  experts.  It  is  claimed  that  it  would  be  much 
better  to  develop  some  specialization  among  the  members 
of  the  export  department,  some  specializing  in  Latin- 
American  markets,  others  in  Far  Eastern. 

If  a  specialist  is  employed,  would  it  be  necessary  to 
give  him  final  supervision  over  all  phases  of  packing  and 
shipping,  making  him  supervisor  of  export  orders  ? 


Problem  19 

The  Riley  Company — Handling  of  Foreign  Correspondence 

It  has  been  a  long-established  custom  of  the  Riley  C-om- 
pany  to  have  the  credit  department  handle  all  correspond- 
ence with  foreign  customers,  whether  dealing  with  sales. 
delivery  or  credit.  This  department  has  no  representa- 
tives in  the  field  but  deals  with  most  of  the  customers 
through  correspondence,  and  it  a])pears  to  be  the  logical 
place  to  concentrate  this  work.  By  making  this  depart- 
ment responsible  for  all  the  foreign  correspondence,  du- 
plication of  work  has  been  avoided,  since  one  letter  may 
combine  the  information  formerly  contained  in  three. 


86     PROBLEMS   IN  EXPORT  SALES   MANAGEMENT 

sent  by  the  sales,  traffic,  and  credit  departments.  This 
policy  also  avoids  the  danger  of  contradiction  between 
the  different  departments.  Before  the  correspondence 
had  been  concentrated  under  one  head  it  frequently  hap- 
pened that  the  sales  department  would  promise  imme- 
diate shipment,  only  to  have  the  traffic  department  write 
a  few  days  later  saying  that  the  shipment  could  not  be 
sent  for  several  weeks:  Because  of  foreign  government 
regulations  regarding  packing,  stencilling,  and  duties,  and 
the  fact  that  customers  are  frequently  not  familiar  with 
American  products,  shipping  units  and  their  dimensions, 
foreign  correspondence  is  of  a  type  different  from  the 
domestic,  and  the  company  believes  that  by  concentrat- 
ing this  work  under  one  head  more  efficient  results  would 
be  secured. 

Frequentl}^  however,  the  credit  department  is  not  able 
to  answer  a  letter  regarding  date  of  shipment  without 
consulting  the  traffic  department.  Occasionally,  because 
of  misunderstanding,  promises  are  made  that  cannot  be 
kept.  When  complaints  are  made  by  customers  alleging 
poor  service,  it  is  frequently  a  matter  of  dispute  between 
the  traffic  and  credit  sections  as  to  which  is  at  fault.  Fric- 
tion and  ill  will  have  therefore  developed  and  complete 
cooperation  between  these  two  departments  is  lacking. 

In  the  matter  of  sales  correspondence  there  is  also  a 
feeling  of  dissatisfaction  on  the  part  of  the  sales  depart- 
ment. Often  a  salesman  has  almost  persuaded  a  prospect 
to  buy  and  a  follow-up  letter  is  needed  to  keep  the  com- 
pany's product  and  name  in  the  mind  of  the  customer 
until  the  salesman  can  call  again  and  close  the  sale.  The 
sales  manager  maintains  that  not  infrequently  the  credit 
department  has  nullified  the  work  of  his  representatives 
by  sending  out  a  formal,  stiff  letter  which  was  not 
helpful  in  producing  sales.  Even  when  it  has  been 
proved  that  the  credit  department  has  written  satis- 
factory letters,  the  sales  manager  still  feels  that  his 
department  might  have  done  a  little  better,  since  the 
credit  department  is  primarily  interested  in  the  matter 
of  credit  and  surety  of  payment  rather  than  in  the  pro- 
motion of  sales. 


EXPORT  SALES  ORGANIZATION  87 

It  has  been  jDroposed  therefore  to  change  the  present 
poHc}^  and  allow  each  department  to  write  its  o\vii  letters 
to  foreign  customers ;  but  although  this  step  would  tie  up 
the  correspondence  with  the  work  of  the  individual  de- 
partments, many  objections  have  been  raised.  In  the 
first  place,  the  company  is  faced  with  a  small  rate  of  profit 
on  its  foreign  business.  It  is  anxious  therefore  to  keep 
expenses  as  low  as  possible.  The  credit  manager  says 
that  one  of  the  most  important  factors  in  foreign  trade 
is  the  securing  of  payment  for  goods  that  have  been  de- 
livered ;  no  matter  how  many  sales  are  made,  or  how  care- 
fully the  goods  are  routed,  unless  payment  is  received  the 
efforts  of  the  company  are  wasted.  This  man  is  sure  that 
if  the  other  departments  would  cooperate  in  giving  the 
information  which  they  would  like  to  have  incorporated 
in  the  letters  sent  out  by  the  credit  department,  the  pres- 
ent system  would  be  satisfactory. 

Should  the  Riley  Company  continue  to  have  all  letters 
to  foreign  customers  handled  by  the  credit  department  f 

Another  suggestion  is  to  have  the  correspondence  in 
various  languages  in  a  separate  department  subject 
jointly  to  the  credit  and  the  sales  departments.  From 
an  organization  point  of  view  is  this  desirable! 


Problem  20 

Reardon  Company — Dividing  Line  Between  Domestic  Sales 
AND  Export  Departments 

In  organizing  its  export  department  the  Reardon  Com- 
pany is  faced  with  the  problem  of  deciding  whether  its 
domestic  department  should  continue  to  handle  the  com- 
pany's sales  in  Mexico  and  Canada,  or  whether  this  ter- 
ritory should  be  given  over  to  the  new  export  department. 
The  company  manufactures  printing  machinery  which 
it  distributes  entirely  through  local  agents.  In  the  past 
the  business,  which  has  been  small,  has  been  han- 
dled by  the   domestic   sales   department,   the   assistant 


88     PROBLEMS    IN   EXPORT   SALES   MANAGEMENT 

sales  manager  devoting  himself  to  the  building  up  of  this 
end  of  the  business.  Now,  however,  foreign  sales  have 
been  increased  and  the  company  is  selling  its  products  in 
a  number  of  Latin  American  countries,  China,  Philippine 
Islands,  Far  East,  and  to  some  extent  in  England, 
France,  and  the  Scandinavian  countries.  It  has  been  de- 
cided, therefore,  to  build  up  an  export  department  with 
the  assistant  sales  manager  at  its  head. 

The  sales  manager  is  loath  to  release  any  territory  to 
the  new  department  and  has  told  the  board  of  managers 
that  the  domestic  sales  division  should  continue  to  handle 
all  Canadian  and  Mexican  business.  These  two  countries 
are  our  next-door  neighbors  and  seem  no  more  foreign 
than  certain  sections  of  our  own  country.  Parts  of  Canada 
have  frequently  been  covered  by  the  company's  salesmen 
from  Buffalo  and  Utica  almost  as  well  as  by  those  who 
had  their  headquarters  in  Toronto.  It  is  no  more  difficult 
for  a  salesman  to  go  to  Canada  than  it  is  to  travel  in  the 
States.  The  people  of  the  two  countries  are  similar  and 
the  business  methods  are  the  same.  Credit  conditions  are 
good,  and  the  domestic  department  is  already  dealing 
with  Canadian  agents.  Furthermore,  machines  can  be 
loaded  into  freight  cars  at  the  factory  and  shipped  to  a 
Canadian  destination  without  changing  cars  in  the  same 
manner  as  to  any  town  in  the  United  States. 

Much  the  same  condition  holds  true  in  the  case  of  Mex- 
ico. There  is  considerable  trade  across  the  border  from 
El  Paso,  Laredo,  and  other  points,  since  most  of  the  im- 
ports into  Mexico  are  made  from  the  United  States.  Many 
American  citizens  have  gone  into  that  country  through 
the  development  of  the  oil  fields,  mines,  and  other  in- 
dustries. Mexican  railroads  connect  with  American  lines 
the  same  as  the  (Canadian  roads.  The  sales  manager  is 
convinced,  therefore,  that  his  department  should  continue 
to  handle  both  Canadian  and  Mexican  business. 

The  new  export  manager,  however,  lias  put  in  a  sti'ong 
]jlea  that  the  sales  to  these  countries  should  be  liandled 
by  the  export  department  along  with  the  business  to  any 
other  foreign  country.  In  the  case  of  Mexico  the  cus- 
toms, language,  and  buying  habits  of  the  people  are  en- 


EXPORT  SALES  ORGANIZATION  89 

tirely  foreign  to  the  United  States.  Credit  is  notoriously 
bad  in  certain  sections,  and  the  company  has  lost  money 
in  the  past  because  of  its  failure  to  appreciate  local  con- 
ditions. Travelling  is  much  more  difficult  than  in  the 
United  States.  Not  only  must  a  salesman  speak  Span- 
ish, but  he  must  be  of  a  different  type  from  the  average 
salesmen  if  he  is  to  secure  the  business.  In  the  opinion 
of  the  export  manager,  sending  a  salesman  to  Mexico  is 
the  same  as  sending  a  salesman  to  Portugal  or  India. 

Although  the  great  majority  of  Canadians  speak  Eng- 
lish, a  substantial  immber  of  the  population  are  French- 
Canadians  and  speak  French  almost  exclusively.  The 
customs  laws  and  other  regulations  must  be  complied  with 
as  in  shipping  goods  to  any  other  foreign  country,  and 
the  export  manager  firmly  believes  that  his  department 
should  have  charge  of  the  sales  in  all  countries  outside 
of  the  United  States. 

The  same  question  has  arisen  in  regard  to  selling  the 
company's  products  in  Porto  Eico,  Hawaii,  Alaska,  the 
Philippine  Islands,  and  other  American  possessions.  The 
domestic  sales  manager  asserts  that  his  department 
would  naturally  handle  all  sliii)ments  to  United  States 
possessions,  since  they  have  practically  the  same  customs 
laws  and  Government  regulations  as  the  States.  The  ex- 
port manager  says,  however,  that  goods  shipped  to  these 
territories  must  be  packed  for  ocean  transportation  the 
same  as  goods  to  South  America  or  the  Far  East.  More- 
over, in  Porto  Rico  and  the  Philippine  Islands  the  busi- 
ness conditions  are  distinctly  foreign  as  compared  with 
the  United  States. 

Should  the  Canadian  and  Mexican  business  be  handled 
by  the  domestic  or  export  sales  departments? 

Which  department  should  handle  shipments  to  Porto 
Rico,  Alaska,  Hawaii,  Philippine  Islands,  and  other 
United  States  possessions? 


90     PROBLEMS   IN   EXPORT   SALES   MANAGEMENT 

Problem  21 

Merrill  Company — Cooperation  of  Domestic  Sales  and 
Export  Departments 

The  domestic  trade  of  the  Merrill  Company,  cotton  mill 
sales  agents,  had  revived  in  the  early  part  of  1921  and  the 
foreign  sales  manager  was  having  difficult}"  in  obtaining 
his  allotted  quota  of  goods  for  the  ensuing  year.  During 
the  preceding  depression  the  managers  of  the  various  de- 
partments had  taken  an  interest  in  foreign  trade  in  order 
to  dispose  of  surplus  stocks,  and  some  of  the  managers 
had  considered  the  feasibility  of  making  special  types  of 
goods  for  different  markets. 

The  Merrill  Company  was  the  selling  agent  for  four 
cotton  mills  located  in  New  England— one  mill  produced 
grey  goods,  another  percales,  another  hosiery,  and  the 
fourth  ginghams.  The  company  was  organized  under 
four  departments — grey  goods,  percales,  hosiery,  and 
ginghams.  Each  department  was  in  charge  of  a  manager 
who  had  been  with  the  firm  for  many  years  and  was 
competent  to  handle  domestic  business. 

About  10%  of  the  business  of  the  company  consisted 
of  foreign  sales,  which  were  in  charge  of  an  export  man- 
ager who  reported  directly  to  each  one  of  the  department 
managers.  The  form  on  the  opposite  page  shows  the 
organization  of  the  company. 

The  president  and  other  executives  of  the  company 
have  been  inclined  to  take  the  attitude  that  the  company's 
mills  must  manufacture  goods  primarily  for  the  domestic 
market  because  nine-tenths  of  the  firm's  business  has 
been  mth  the  United  States  and  Canada  and  if  goods 
made  especially  for  the  foreign  mark(^t  fail  to  sell,  the 
company  cannot  use  its  many  outlets  in  the  domestic 
field  for  disposing  of  them.  The  export  manager  has  re- 
quested the  president  to  have  the  company's  mills  make 
up  orders  of  pique  and  other  cotton  textiles  in  the  widths 
and  patterns  demanded  in  South  America  and  the  Far 
East,  but  usually  orders  from  the  United  States  and 
Canada  have  crowded  out  any  special  requirements  of  the 
foreign  department.    In  the  years  when  business  is  good 


EXPORT  SALES  ORGANIZATION 


91 


in  the  domestic  market  it  frequently  is  impossible  for  the 
export  dej^artment  to  secure  either  enough  goods  or 
goods  of  the  right  kind  to  satisfy  the  demand  of  foreign 
customers,  but  when  the  market  in  the  United  States  is 
depressed  the  foreign  sales  department  is  asked  to  dis- 
pose of  several  times  its  normal  volume  in  order  to  relieve 
the  pressure  on  the  domestic  organization. 

The  export  manager  has  had  difficulty  in  formulating 
and  carrying  out  a  foreign  sales  policy.  It  has  been  im- 
possible to  plan  for  the  future.  Each  department  man- 
ager had  final  authority  in  both  the  domestic  and  foreign 
sale  of  his  particular  commodity.  Each  was  interested 
in  developing  foreign  sales  in  times  of  domestic  depres- 
sion but  lost  interest  as  soon  as  the  domestic  market 
improved.  It  was  also  impossible  to  obtain  a  continuous 
production  of  goods  adapted  to  each  particular  market. 
Some  markets  required  cloth  of  a  special  width,  others 
required  cloth  of  certain  color,  others  required  cloth 
that  had  been  sized.  The  export  manager  was 
convinced  that  the  mills  could  produce  any  kind  of  cloth 
desired  by  any  market.  He  was  familiar  with  the 
English  cotton  mills,  and  with  the  Chinese,  Indian,  and 


Mill 

Mill 

Mill 

Mill 

L_ 

1 

1 

1 

1 

Merrill  Company 

1 

II 

1 

1 

1 

1 

Grey  Goods 
Department 

Percale 
Department 

Hosiery 
Department 

Gingham 
Department 

1 

1 

1 

1 

1 

II 

Foreign  Trade 
Department 

FORM    4.      Merrill    Company — Organization    Chart 


92     PROBLEMS   IN   EXPORT  SALES   MANAGEMENT 

Latin  American  markets,  and  was  certain  that  the  Eng- 
lish products  could  be  duplicated  and  the  English  prices 
met.  The  treasurers  of  the  mills  were  willing  to  make 
any  kind  of  cloth  that  could  be  sold. 

In  order  to  improve  the  situation,  the  export 
manager  is  attempting  to  have  the  Merrill  Com- 
pany budget  its  sales  every  six  months  in  the  domestic 
market  as  well  as  in  the  foreign  field.  This  budget 
would  be  made  up  at  least  six  months  in  advance,  based 
on  the  sales  of  the  corresponding  season  for  the  preced- 
ing year,  a  forecast  of  business  conditions  of  the  coming- 
season,  and  an  estimate  as  to  the  amount  of  orders  the 
different  branches  would  be  able  to  secure.  This  plan 
would  give  in  detail  estimated  sales  by  materials  and 
patterns  as  well  as  covering  the  total  volume  of  orders 
that  each  branch  expected  to  secure.  In  the  case  of  the 
export  department  this  budget  would  cover  estimated 
sales  for  each  country  as  well  as  by  materials.  Each  kind 
of  cloth  would  be  described  minutely,  giving  the  pattern, 
width,  weight  of  material,  number  of  picks  to  the  inch, 
as  well  as  other  specifications  which  would  be  needed  by 
the  mills.  All  cloth  of  one  kind  would  be  made  at  once, 
so  its  manufacture  would  be  as  economical  as  possible. 
Even  if  certain  orders  for  special  patterns  might  be  filled 
at  a  loss,  this  plan  would  permit  the  foreign  department 
to  Iniild  up  a  clientele  tliat  would  purchase  from  the  Mer- 
rill Company  rather  than  through  competitors  and  would 
make  it  possible  for  its  salesmen  and  agents  to  satisfy 
their  customers  that  \h('  company  was  i-eally  trying  to 
cater  to  their  wants. 

What  change  should  have  heen  made  in  the  organiza- 
tion of  the  Merrill  Company  to  develop  its  foreign  trade? 


EXPORT  SALES  ORGANIZATION  m 

Problem  22 

FisKE  Company — Advertising  Agency  vs.  Development  of 
Foreign  Advertising  Department 

The  Fiske  Company  exports  perfumes,  powders, 
creams,  and  other  toilet  preparations,  most  of  which  are 
distributed  through  exclusive  agents.  In  the  United 
States  the  company  has  advertised  extensively  in  publi- 
cations with  a  national  circulation  and  has  built  up  a 
capable  advertising  department.  Its  largest  annual 
volume  of  foreign  sales  was  about  $280,000,  but  within 
the  past  year  or  two  this  point  has  not  been  reached  and 
the  company  has  decided  to  advertise  abroad  in  an  at- 
tempt to  build  up  its  foreign  distribution.  The  domestic 
advertising  department  is  not  familiar  with  conditions  in 
the  foreign  iield,  it  has  no  translators  on  its  staff,  and  it 
has  no  foreign  connections  through  which  to  bargain  with 
foreign  publications  for  low  advertising  rates.  The  com- 
pany has  taken  a  long-time  view  of  the  situation  and  in- 
tends to  go  into  the  foreign  advertising  field  to  stay.  It 
is  now  considering  whether  it  should  organize  a  foreign 
advertising  department  of  its  own  or  avail  itself  of  the 
services  of  a  foreign  advertising  agency. 

The  Gladstone  Foreign  Advertising  Agency,  as  well  as 
similar  advertising  firms,  has  been  interested  in  securing 
the  foreign  advertising  business  of  the  Fiske  Company. 
After  making  an  investigation,  the  Fiske  people  have 
satisfied  themselves  that  if  any  foreign  advertising- 
agency  is  to  be  selected,  the  Gladstone  firm  will  be  the  one 
because  of  its  excellent  reputation  among  its  clients.  It 
has  had  considerable  experience  in  this  field  and  knows 
the  pitfalls  ot  l)e  avoided.  It  is  familiar  with  the  foreign 
publications,  their  vahie  and  limitations,  and  does  not 
need  to  experiment  with  dilferent  media  in  order  to 
find  out  which  ones  will  render  the  Fiske  Company  the 
services  it  desires.  Its  stat^:'  of  translators  and  copy- 
righters  has  had  practical  experience  in  handling  copy 
that  appeals  to  readers  in  South  America,  Australia, 
England,  and  those  parts  of  Europe  which  the  Fiske  Com- 


94     PROBLEMS   IN   EXPORT   SALES   MANAGEMENT 

paiiy  is  desirous  of  reacliiiig  through  advertising.  Like 
other  foreign  agencies,  the  Gladstone  firm  receives  its 
compensation  from  commissions  from  foreign  pubUca- 
tions  for  the  space  which  its  clients  use.  It  is  to  its  im- 
mediate interest,  therefore,  to  keep  the  amount  of  money 
spent  by  the  Fiske  Company  as  high  as  possible  rather 
than  at  a  figure  which  might  be  more  economical.  This 
agency  also  has  the  drawback  of  not  being  familiar  with 
the  company's  products  and  would  probably  find  difficulty 
in  describing  Fiske  toilet  preparations  in  a  different  man- 
ner from  any  other  toilet  preparations  of  a  similar  na- 
ture. 

By  organizing  a  foreign  advertising  department  the 
Fiske  Company  would  avoid  some  of  the  evils  of  the  ad- 
vertising agency.  It  w^ould  have  an  organization  f amihar 
with  its  products,  which  w^ould  be  interested  in  running 
an  advertising  campaign  with  a  low  expenditure,  not 
owing  its  support  to  commissions  received  from  foreign 
publications  in  which  it  placed  its  copy.  Advertising  in 
the  foreign  field  is  quite  different  from  that  in  the  United 
States.  The  amount  of  newspaper  and  magazine  space 
devoted  to  advertising  is  usually  smaller,  even  in  Great 
Britain,  than  in  jjublications  in  this  country.  There  are 
fewer  full  page  and  double  page  spreads  since  many  for- 
eigners are  convinced  that  extensive  advertising  must  in 
the  long  run  be  paid  for  by  consumers  through  increased 
prices.  It  is  sometimes  difficult  to  find  good  media  which 
cater  to  the  class  of  people  it  is  desired  to  reach ;  and  al- 
though some  circularizing  is  done  in  the  foreign  field,  it 
is  probable  that  foreign  advertising  will  not  play  the  role 
that  it  does  in  the  United  States,  at  least  for  a  immber  of 
years  to  come.  Because  of  the  volume  of  its  export  sales, 
a  foreign  advertising  department  organized  by  the  Fiske 
Company  would  i)robably  be  small.  Since  it  could  not 
afford  to  sup})ort  a  staff'  of  translators,  it  would  Ix'  nec- 
essary to  secure  one  or  two  people  with  sufficient 
knowledge  and  experience  to  make  them  capal)le  of  wiit- 
ing  foreign  copy,  making  translations,  and  placing  and 
checking  the  advertising  in  foi-eign  pul)lications.  Foreign 
advertising  experts  of  this  calibre  would  be  difficult  to 
secure  and  would  demand  a  good  salary. 


EXPORT  SALES  ORGANIZATION  95 

What  action  should  the  Fiske  Company  take  in  han- 
dhng  its  foreign  advertising!  If  it  decides  to  establish  its 
owai  foreign  advertising  department,  should  it  be  part  of 
the  advertising  department  handling  both  domestic  and 
foreign  advertising,  part  of  a  separate  export  depart- 
ment, or  independent  f 


^   Problem  23 

Leonard  Company — Should  the   Export  or   Domestic   Credit 
Department  Handle  Foreign  Credits?" 

(when  the  Leonard  Company  first  entered  foreign 
trade,  it  was  decided  to  handle  all  foreign  credits 
through  the  domestic  credit  department  in  the  same 
manner  as  domestic  credits.  This  firm  sells  cotton  tex- 
tiles through  its  own  salesmen  and  agents,  chiefly  in 
Latin  America  and  the  Far  East.  In  1920  and  1921, 
because  of  falling  j^rices  and  unfavorable  exchange 
rates,  the  company  lost  money,  particularly  in  Latin 
America,  through  the  failure  of  some  of  its  customers 
to  meet  their  obligations.  Since  that  time,  because  of 
the  difficulty  in  securing  adequate  information  on  many 
foreign  firms  and  because  of  rapidl}'  changing  condi- 
tions, the  credit  department  has  adoi:)ted  the  policy  of 
granting  only  short-time  credit  terms  to  foreign  custom- 
ers, even  those  in  the  strongest  financial  condition."^ 

(The  export  manager  states  that  as  a  result  of  business 
conditions  in  most  foreign  countries,  unfavorable  ex- 
change rates,  and  English,  German,  and  Japanese  com- 
petition, his  sal^s  have  been  cut  almost  in  half  and  that 
at  a  time  when  liberal  credits  are  needed  to  secure  even 
this  amount  of  business,^  the  credit  department  has 
adopted  a  policy  that  renders  the  export  work  even 
more  difficult.  In  his  opinion  a  domestic  credit  organi- 
zation is  not  competent  to  handle  questions  of  foreign 

*See  the  articles  entitled  "Practical  Exporting"  in  The  World's  Markets 
of  Nov.  1920,  Dec.  1920,  and  Jan.  1921;  also  Wyman,  Export  Merchan- 
dising, Chapter  XXXI. 


96     PROBLEMS   IN   EXPORT   SALES    MANAGEMENT 

credits.  (Since  the  amount  of  foreign  business  done  by 
the  Leonard  Company  is  insufficient  to  Avarrant  the 
estabUshment  of  a  foreign  credit  department,  the  export 
manager  proposes  that  his  organization  should  take  over 
this  work.  Through  salesmen  in  the  field  the  export 
manager  should  be  able  to  secure  credit  reports  from 
men  who  are  acquainted  with  the  actual  situation  affect- 
ing each  customer,  and  in  addition  he  can  have  at  his 
command  all  the  credit  information  now  available  in  the 
credit  department.^ 

This  plan  is  contrary  to  the  j^resent  system  of  organi- 
zation of  the  Leonard  Company,  in  which  the  credit 
department  not  only  passes  on  matters  of  credit  but  also 
acts  to  a  limited  extent  as  a  check  upon  the  operatious 
of  the  other  departments.^,  To  give  the  export  manager 
powder  to  pass  on  foreign  credits  would  be  the  same  as 
giving  the  domestic  sales  manager  authority  to  handle 
credits  in  the  United  States.  ;  The  credit  manager 
acknowledges  that  his  course  is  somewhat  drastic,  but 
he  says  that  he  has  been  forced  to  take  this  view  of  for- 
eign trade  in  order  to  make  the  export  business  show  a 
profit.  ^  In  his  opinion  it  is  better  to  decline  nine  out  of 
ten  orders,  making  a  profit  on  the  tenth  order  and  the 
small  amount  of  cash  business  that  might  come  to  the 
compan}^  from  the  other  nine,  than  to  grant  credit  to 
all  ten  and  through  the  failure  of  one  customer  to  meet 
his  obligations  lose  enough  to  wipe  out  the  profits  on 
the  whole  ten. 

(As  a  compromise  it  has  l)een  suggested  that  the  credit 
department  should  continue  to  handle  foreign  credits, 
but  that  reports  from  tlie  export  department  should  be 
given  due  weight.  The  export  manager  would,  have  his 
salesmen  make  out  credit  reports  on  all  customers. 
Whenever  he  was  informed  l)y  the  credit  department 
that  a  customxcr  whom  he  considered  worthy  of  an  exten- 
sion of  credit  facilities  had  l)ee]i  refused  credit  terms, 
he  could  present  his  report  and  any  other  obtainable 
evidence  to  the  credit  manager  for  a  reconsideration  of 
the  case.     This  plan  requires  more  time  for  the  credit 


EXPORT  SALES  ORGANIZATION  97 

department  to  give  a  final  decision  as  to  the  status  of 
each  customer,  and  the  resulting  delays  might  force  a 
number  of  orders  to  wait  over  for  the  next  steamer, 
which  would  be  detrimental  to  foreign  business.  Sev- 
eral members  of  the  organization  hold  that  if  it  is  wrong 
in  principle  for  the  export  manager  to  handle  foreign 
credits,  it  is  equally  wrong  for  him  to  attempt  to  influ- 
ence the  credit  manager  in  the  granting  of  foreign 
.credits. 

What  action  should  be  taken  by  the  Leonard  Company 
in  granting  foreign  civditsl^ 


Problem  24 

Gray  Hat  Company — Relation  of  Export  and  Production 
Departments 

The  export  department  of  the  Gray  Hat  (company  was 
not  organized  until  it  was  urgently  needed.  For  several 
years  the  company  had  received  some  foreign  orders 
through  commission  houses  but  had  given  little  attention 
to  this  part  of  the  business.  When  the  sales  in  the  domes- 
tic market  fell  oif  during  a  periodic  slump,  the  company 
began  to  realize  the  value  of  foreign  trade  and  secured 
as  an  export  manager  a  salesman  who  had  had  a  num- 
ber of  years'  experience  in  South  American  markets. 
Still  no  export  department  was  formed  until  this  export 
manager  took  a  month's  vacation,  and  in  his  absence  it 
was  found  that  no  one  in  the  domestic  organization  could 
handle  the  work.  Even  when  the  department  was  finally 
formed,  everyone  in  the  firm  looked  upon  it  as  a  neces- 
sary evil.  The  production  department  particularly  was 
openly  hostile.  The  si)ecial  requirements  and  specifica- 
tions of  foreign  orders  were  annoying  to  both  the  work- 
ers and  the  superintendent,  who  disliked  the  fussiness  of 
special  orders  tiiat  interfered  with  routine  work.  When- 
ever possible,  export  shipments  were  the  last  to  be  made. 

During  the  recent  depression  the  factory  would  have 
had  to  shut  down  had  not  sufficiently  large  orders  arrived 


98     PROBLEMS   IN    EXPORT   SALES   MANAGEMENT 

from  Mexico,  South  America,  and  Australia.  The 
export  manager  lost  no  opportunity  to  drive  home  to 
the  whole  factory  force  that  the  export  orders  were 
keeping  the  plant  in  operation.  By  explaining  to  the 
superintendent  and  foremen  some  of  the  conditions  and 
customs  in  the  different  countries  from  which  the  foreign 
orders  had  come,  he  convinced  them  of  the  necessity  of 
complying  strictly  with  the  specifications  sent  in  by  the 
export  salesmen  if  customers  were  to  be  satisfied  and  to 
continue  to  send  in  their  orders.  For  the  first  time  the 
production  department  began  to  appreciate  that  the 
export  department  was  to  be  an  important  factor  in  the 
success  of  the  company. 

Having  removed  much  of  the  nnsunderstanding  that 
existed  on  the  part  of  the  production  department  con- 
cerning the  reason  for  conforming  to  the  specifications 
on  foreign  orders,  the  export  manager  is  now  attempting 
to  bring  about  a  closer  relation  between  the  two  depart- 
ments. At  a  conference  of  the  executives  of  the  com- 
pany he  cited  several  instances  where  shipments  had 
been  refused  because  of  the  production  department's 
failure  to  comply  with  the  instructions  of  the  salesman. 
Au  order  for  six  hundred  hats  for  a  dealer  in  Mexico 
City,  for  example,  had  recently  been  cancelled  and  the 
hats  returned  because  the  brim  was  not  rolled  near  the 
edge  as  directed.  Because  of  these  difficulties  this  man- 
ager requested  that  the  export  department  have  an 
inspector  of  its  own  at  the  factory  in  order  to  see  that 
specifications  were  followed. 

The  export  manager  also  requested  that  a  rule  be 
made  whereby  all  orders  for  export  would  have  priority 
over  domestic  orders  as  to  time  of  manufacture  and  of 
shipment.  A  delay  of  a  day  or  two  at  the  factory  on  a 
domestic  order  ordinarily  might  result  in  the  dealer's 
receiving  his  merchandise  a  day  later  than  he  exjiected, 
but  a  delay  of  a  day  on  an  export  order  might  mean  that 
the  shipment  would  miss  the  boat  and  in  some  instances 
might  have  to  wait  a  month  or  six  weeks  for  another 
steamer.     Such  a  delay  frequently  means  the  refusal  of 


EXPORT  SALES  ORGANIZATION  99 

the  sliipmeiit  when  it  arrives  or  at  least  the  failure  of 
the  customer  to  continue  to  order  hats  from  the  Gray 
Company.  The  production  superintendent  explained 
that  he  usually  bunched  several  orders  for  the  same  kind 
of  hats  so  as  to  secure  greater  economy  in  operation.  If 
a  foreign  order  Avere  to  be  given  priority  over  domestic 
orders,  it  would  mean  the  breaking  down  of  the  efficient 
operation  of  the  plant.  The  export  manager  agreed  that 
his  priority  rule  might  cause  some  trouble,  but  he  said 
that  there  was  no  use  to  try  to  do  business  in  the  foreign 
field  unless  promjDt  shipments  could  be  made. 

Should  the  Gray  Hat  Company  adopt  the  recommen- 
dations of  the  export  manager  f 

Would  the  establishment  of  a  committee  consisting  of 
the  export  manager,  the  general  manager,  and  the  pro- 
duction superintendent  meeting  in  daily  conference  solve 
the  problem! 


CHAPTER  III 


RESEARCH  AND  PLANNING 
IN  EXPORT  TRADE 

THE  application  of  scientific  principles  to  business 
enterprise  implies  that  executive  action  takes 
place  only  on  the  basis  of  reason  and  judgment, 
that  no  decisions  will  be  made  except  upon  the  basis  of 
such  knowledge  of  facts  and  factors  as  is  available 
within  the  time  during  which  such  decisions  can  be 
reached.  If  the  degree  of  judgment  exercised  is  the 
same,  it  follows  logically  that  the  more  adequate  the 
facts  the  better  the  decision.  Business  judgment  is  the 
result,  the  conclusion  derived  frcmi  analysis  and  synthe- 
sis of  tangible  and  intangible  facts,  many  of  which  are 
incommensurable  or  at  best  can  only  be  roughly  esti- 
mated. 

In  no  field  of  business  knowledge  is  the  need  for  facts 
and  the  necessity  for  information  as  a  basis  for  proper 
planning  and  operation  more  clearly  recognized  than  in 
export  trade  by  those  who  are  intelligently  conducting 
their  business.  Here  as  in  other  fields,  however,  the 
nature,  sources,  and  methods  of  securing  facts  that  will 
aid  in  decision  require  much  additional  study  before 
general  principles  may  be  laid  down  with  any  degree  of 
assurance.  It  is  obvious  that  in  the  collection  of  facts 
we  should  select  only  those  which  will  be  useful,  but 
vision  and  imaginnlion  are  required  to  foresee  the  types 
of  decisions  which  will  liave  to  be  made  and  consequently 
know  what  facts  will  l)e  useful  in  making  such  decisions. 
Purthermoi-e,  it  is  p;)()r  judgment  which  does  not  weigh 
the  intangible  factors  together  with  tangible  facts. 

It  may  seem  in  many  cases  that  material  facts  are  out- 
weighed by  intangible  factors,  that  the  importance   of 

100 


PLANNING  IX   EXPORT  TRADE  101 

the  personal  equation  diniinislie&  to  a  point  of  wortliless- 
iiess  the  collection  of  any  facts  bearing  upon  business 
problems.  That,  however,  is  an  extreme  opinion;  but  no 
more  so  than  the  opposing  ojjinioii  that  facts  and  statis- 
tics are  the  only  things  to  be  taken  into  account  and  that 
human  motives  and  human  actions  are  not  to  be  consid- 
ered if  they  seem  to  oppose  the  conclusions  to  be  dra^^^l 
from  the  tangible  facts.  From  one  point  of  view  human 
relations  and  human  reactions  become  facts  capable  of 
measurement  by  the  law  of  averages.  Rarely,  however, 
does  the  business  man  have  such  a  mass  of  observation 
at  his  command.  Since  he  is  constantly  dealing  with  too 
small  a  number  to  be  called  a  "fair  sample"  from  a  sta- 
tistical point  of  view,  he  could  not  make  use  of  such  gen- 
eralizations if  he  would.  It  might  be  demonstrated  that 
99  per  cent  of  foreign  agents  pay  their  bills,  yet  an  ex- 
port manager  dealing  witli  exclusive  agents  in  various 
])arts  of  the  world  could  not  place  enough  dependence 
upon  the  law  of  averages  to  dispense  with  careful  study, 
selection,  and  supervision  of  his  agents,  realizing  very 
well  that  without  such  procedure  the  percentage  of 
defaulting  agents  would  probably  be  very  much  larger 
than  one  per  cent.  In  credits  in  particular  the  exporter 
wall  not  infrequently  allow"  impressions  of  that  intangible 
set  of  qualities  called  character  to  outweigh  the  tangible 
facts  concei'iiing  the  credit  applicant,  but  no  good  credit 
man  would  disavow  the  usefulness  of  fact.  From  one 
])oint  of  view  he  feels  that  the  more  tangible  facts  he  can 
secure  the  more  definitely  can  he  appraise  the  intangible 
factors. 

The  facts  collected  and  selected  must  of  course  be  use- 
ful. More  than  that,  they  must  be  used.  Not  a  few  con- 
cerns have  collected  vast  quantities  of  facts  and  details 
and  have  not  used  them  or  have  used  them  only  after 
they  liad  become  out  of  date.  The  facts  which  research 
activities  aim  at  securing  may  be  used  in  connection  with 
every  phase  of  export.  Organization  will  be  made  largely 
upon  the  basis  of  opinions  wliicli  are  the  result's  of  con- 
sideration of  facts  regarding  present  operations  and 
future    developments.      Export   policies    should   be   the 


102    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

result  of  careful  study;  that  is,  the  consideration  of  facts 
and  factors  involved.  The  facts  secured  by  research  may 
be  used  in  planning  selling  operations,  both  in  the  plan- 
ning of  advei'tising  in  all  its  various  forms  and  in  the 
planning  for  sales  force.  In  tlio  training,  equipment,  and 
supervision  of  salesmen  facts  cannot  be  dispensed  with. 
The  available  fact  is  pitifully  small  at  best.  Mention  has 
been  made  of  the  necessity  for  fact  in  credits  and  collec- 
tions, but  the  necessary  facts  include  not  only  facts 
concerning  the  condition  of  the  individual  l)ut  also  con- 
cerning the  external  conditions  which  have  an  influence 
upon  the  purchasing  power  and  paying  ability  of  the 
credit  ap])licant.  Facts  are  needed  to  determine  where 
to  sell  tlu>  goods  and  what  to  sell  in  })articular  markets. 
Facts  are  needed  to  determine  the  best  methods  of  ship- 
ment, to  give  the  delivery  sei'vice  which  is  necessary  for 
the  upbuilding  of  substantial  foreign  trade.  It  is  the 
business  of  research  to  secure  such  facts  and  the  business 
of  planning  executives  to  use  those  facts  in  making  plans 
whicli  will  result  in  the  innnediate  and  i)ermanent  main- 
tenaiice  and  upbuilding  of  the  export  enterprise. 

As  an  integral  part  of  the  l)usiness  enterprise  and  as 
one  of  the  sections  which  comes  into  direct  contact  with 
external  business  conditions,  the  export  manager  must 
not  only  have  facts  initially  to  determine  what  policies 
to  adopt  and  what  methods  to  use,  but  he  nmst  be  cur- 
rently informed  of  changes  in  conditions  which  may  call 
for  changes  in  interpretation  or  even  changes  in  formu- 
lation of  export  policies.  Many  concerns  look  upon  export 
trade  as  a  stabilizing  factor  in  the  l)usiness ;  if  it  is  a 
stabilizing  factor,  it  is  partly  so  because  of  the  lack  of 
synchronization  of  cyclical  movements  in  different  coun- 
tries. It  is  just  as  important  for  the  export  manager  to 
know  tiu'  general  state  of  business  conditions  in  countries 
witii  which  he  is  doing  business  as  it  is  for  the  (h)niestic 
manage)-  to  know  the  genei'al  ti'end  of  business  condi- 
tions in  tJie  domestic  market.  AVe  arc  still  far  from  the 
I)oint  where  statistical  and  otiici-  information,  upon  the 
basis  of  which  the  trend  of  bnsiness  may  be  discerned. 


PLANNING  IN  EXPORT  TRADE  103 

is  available  for  even  the  more  important  foreign  mar- 
kets. Siicli  data  are  collected  and  can  be  collected  only 
in  tlie  more  highly  developed  countries.  As  a  conse- 
quence, the  export  manager's  opinions  upon  business 
conditions  must  be  formed  upon  less  definite  and  less 
comprehensive  data  than  the  opinions  of  the  domestic 
sales  manager. 

To  secure  the  facts  for  proper  conduct  of  export  oper- 
ations all  research  methods  aie  open  to  the  export  execu- 
tive, whether  he  does  the  research  personality  or  whether 
he  delegates  it  to  subordinate  officials  or  to  a  specialized 
research  department.  The  chief  sources  are  personal 
investigation,  the  opinions  and  statements  of  authorities 
and  experts,  corresjjoiidence  and  questionnaires,  and 
lastly  facts  to  be  ol)tained  from  printed  sources.  Per- 
sonal investigation  results  iu  first-hand  information, 
subject  of  course  to  the  limitations  of  observation  by  an 
individual  and  to  the  particular  characteristics  of  the 
observer  himself.  Supplementary  to  other  types  of 
investigation,  personal  investigation  and  observation  in 
foreign  markets  have  a  value  which  cannot  be  denied. 
Opinions  of  other  personal  observers  obtained  through 
special  connections,  sometimes  through  government  offi- 
cials, are  of  course  superior  to  information  obtained 
from  those  who  are  not  particularly  interested  in  the 
l)usiness  for  which  the  facts  are  to  be  used.  The  weak- 
nesses of  the  questionnaire  and  of  correspondence  as  a 
means  of  securing  information  from  those  who  are  in  a 
jjosition  to  give  first-hand  information  are  developed  in 
any  study  of  statistical  and  research  methods,  but 
under  certain  conditions  a  very  distinct  advantage  can 
be  gained  by  the  judicious  use  of  such  methods.  One  of 
the  most  neglected  and  yet  along  certain  lines  among 
the  most  valnablc  sources  of  information  are  tlic  printed 
sources  of  infoi'mation — l)()oks,  ])('rio(licals,  and  pam- 
])lilets — which  may  be  classified  according  to  the  source 
of  the  material  as  governmental,  semi-]nil)lic  and  private 
l)ublications.  Information  upon  foreign  markets  and 
foreign  trade  methods  is  available  to  a  business  man 
at    comparatively    small    cost.      Government    bureaus 


lOi    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

banks,  business  houses,  periodicals  and  newspapers,  and 
export  organizations  are  all  working  toward  the  creation 
of  an  intelligent  interest  in  foreign  trade  on  the  part  of 
the  public,  aiming  at  the  same  time  to  give  the  business 
man  a  more  detailed  knowledge  of  the  problems  con- 
nected with  international  trade. 

The  primary  object  of  the  Bureau  of  Foreign  and 
Domestic  Commerce  is  to  assist  American  manufactur- 
ers and  exporters  in  the  extension  of  their  foreign  trade. 
Although  the  headquarters  are  at  Washington,  district 
offices  are  maintained  in  several  of  the  larger  cities.  The 
vast  amount  of  information  ^vliicli  the  Bureau  of  Foreign 
and  Domestic  Commerce  collects  and  analyzes  through 
its  hundreds  of  representatives  in  110  countries,  is  made 
available  to  the  exporter  in  two  ways:  first,  upon  request 
the  Bureau  will  give  any  business  man  such  information 
as  it  possesses  upon  the  subject  of  interest;  secondly, 
matei'ial  of  more  general  interest  is  made  available  in 
printed  form  through  its  publications.  The  exporter 
secures  information  as  to  specific  opportunities,  methods 
of  conducting  foreign  business,  and  conditions  in  foreign 
countries.  Among  the  })ublications  of  the  Bureau  are 
the  weekly  journal  entitled  "Commerce  Reports"  con- 
taining authoritative  articles  and  notes  received  by  mail 
and  cable  from  consular  officers,  connnercial  attaches, 
trade  commissioners  and  others,  as  well  as  excerpts  from 
foreign  publications  and  commercial  statistics  compiled 
l)y  the  Department  of  Commerce.  It  is  the  medium 
through  which  information  on  foreign  trade  matters  is 
distributed  to  American  business  men.  It  is  available  to 
business  men  through  the  Superintendent  of  Documents 
at  the  rate  of  $3.00  per  year.  Other  publications  of  the 
Bureau  are  the  bulletins  on  special  subjects.  Some  pre- 
sent a  survey  of  the  entire  worhl's  markets  for  certain 
lines  of  goods.  Others  contain  an  intensive  study  of  par- 
ticular iields.  Still  others  furnish  a  general  account  of 
some  country  or  gi-ouj)  of  countries.  Bulletins  have  been 
issued  on  the  cotton  goods  trade  for  almost  every  coun- 
try in  the  world.     There   are  pamphlets   dealing  with 


PLANNING  IN  EXPORT  TRADE  105 

hardware,  furniture,  eoiistruetion  materials,  railway 
equipment,  agricultural  implements,  electrical  goods, 
cotton  seed  oil,  shoes  and  leather,  machine  tools,  paints 
and  varnishes,  canned  goods,  etc.  Comprehensive  hand- 
books have  been  issued  on  Australia,  New  Zealand,  Rus- 
sia, South  America,  Central  America,  China,  and  other 
countries.  A  complete  list  of  these  publications  may  be 
obtained  without  charge  from  the  various  district  ottices. 
There  are  also  pul)lications  of  a  statistical  nature  and 
those  dealing  with  tarilt's. 

Since  its  reorganization  during  the  summer  of  1921, 
the  Bureau  of  Foreign  and  Domestic  Commerce  is  in  a 
position  to  render  even  more  extensive  service  than  here- 
tofore. There  are  special  divisions  for  the  leading  com- 
modities, each  headed  by  a  man  with  practical  experience 
in  the  sale  of  those  products  abroad.  The  exporter  can 
obtain  from  the  Western  European,  the  Eastern  Euro- 
pean, the  Latin  American,  the  Far  Eastern,  and  the  Near 
Eastern  Divisions  special  information  as  to  signiticant 
trade  conditions,  connnercial  regulations,  the  industries 
and  resources  of  nations,  etc.  Export  statistics  of  the 
United  States  assist  the  manufacturer  in  determining 
whether  or  not  his  organization  is  getting  its  share  of 
foreign  trade,  while  import  statistics  indicate  the  sources 
of  raw  materials.  Every  exporter  realizes  the  necessity 
of  obtaining  tariff  rates  in  force  in  the  different  foreign 
countries,  particularly  in  the  case  of  goods  competing 
with  a  native  product  or  in  the  case  of  countries  that 
give  preferential  rates  of  duty  to  the  goods  of  other 
countries.  Information  as  to  these  rates,  together  with 
rules  governing  commercial  travelers  in  foreign  coun- 
tries, consular  regulations  of  foreign  countries,  rates  of 
internal  taxes  in  foreign  countries,  and  foreign  trade- 
mark and  patent  regulations,  can  be  obtained  by  appli- 
cation to  the  Bureau  of  Foreign  and  Domestic  (^onnnerce. 
The  divisions  of  commercial  laws  and  transportation 
deal  with  questions  arising  in  their  respective  tields. 
The  Bureau  maintains  27  permanent  foreign  offices  in 
the  important  commei'cial  countries  of  the  world;  these 


lOG    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

are  in  charge  of  commercial  attaches  and  trade  commis- 
sioners. A  classified  list  of  prospective  buyers  or  agents 
all  over  the  world,  with  indication  as  to  their  relative 
importance,  is  kept  up  to  date  and  available  for  the 
x\merican  manufacturer  doing  business  abroad.  The 
Bureau  maintains  a  classified  index  of  American  mer- 
chants and  manufacturers  interested  in  oversea  trade 
a]Kl  supplies  them  without- charge  with  trade  lists  and 
confidential  information  on  foreign  trade  opportunities. 

The  larger  banks  have  developed  foreign  trade  depart- 
ments, and  in  their  endeavor  to  build  up  business  they 
have  gone  to  great  lengths  in  collecting  and  distributing- 
data  regarding  every  phase  of  foreign  trade.  Informa- 
tion is  made  available  for  exporters  upon  foreign  mar- 
kets, names  of  buyers,  credit  ratings,  taritfs,  export 
methods,  conditions  in  foreign  markets.  These  banks 
endeavor  to  keep  in  touch  Avitli  all  the  important  inter- 
national connnercial  developments  and  to  give  their 
customers,  and  others  who  may  be  interested,  the  latest 
available  information.  From  time  to  time,  pamphlets, 
bulletins,  and  rejjorts  are  issued  dealing  with  topics  of 
particular  interest  to  foreign  traders.  ]t  is  evident  that 
banks,  through  their  corresi)<)ndents  and  branches,  are 
in  a  position  to  furnish  much  material  that  will  supple- 
ment what  the  government  ofi'ei's. 

Semi-pnblie  and  trade  organizations  are  also  sources 
of  foreign  trade  information,  which  should  not  be  disre- 
garded. The  Chanil)ers  of  Connnerce  frequently  main- 
tain foreign  trade  bureaus,  which  endeavor  to  serve 
im])orters  and  exporters  in  many  ways.  They  keep  cur- 
rent lists  of  importers  and  exporters,  forwarders,  and 
export  houses  and  are  able  to  give  advice  of  various 
kinds  and  inroi-m.-iiioii  as  lo  iiic  Taciliiies  offei-ed  by  the 
]);irticnlar  section. 

The  Nalioiial  Association  ol'  Mnnni'ncinrers  also  main- 
tains an  important  file  of  credit  inronnatiim  and  infor- 
mation on  foreign  conditions  for  the  l)enefit  of  its 
exporting  members.  Mention  of  the  Pliiladeli)hia  Com- 
mercial Museum  should  not  be  omitted.  Other  trade 
associations  have  more  and  more  come  to  deal  with  for- 


PLANNING  IN  EXPORT  TRADE  J  07 

eign  trade  toioics,  and  very  frequently  something  of  value 
may  be  secured  from  tJiem,  They  watch  tariff  regulation 
and  attemi)t  to  adjust  trade  conditions.  The  National 
Foreign  Trade  Council  represents  a  leading  organization 
devoted  exclusively  to  the  fuitherance  of  foreign  trade. 
Through  its  conventions  and  occasional  researches  and 
publications,  it  has  stimulated  much  interest  in  foreign 
trade  among  the  manufacturers  of  the  United  States. 
The  American  Manufacturers'  Export  Association 
should  also  be  mentioned. 

The  export  journals  and  magazines  furnish  much  of 
interest  to  the  exporter,  and  some  of  them  are  printed 
in  several  languages  for  circulation  in  foreign  markets 
and  carry  a  large  volume  of  advertising  of  American 
concerns  seeking  foreign  customers.  Distinction  must 
be  made  between  (a)  the  export  journals  intended  pri- 
marily for  circulation  among  exporters  within  the  United 
States,  such  as  The  World's  Markets,  Export  Trade 
and  Exporters'  Review,  The  Americas,  and  the  Weekly 
Btdletin  published  by  the  Philadelphia  CJommercial  Mu- 
seum; (b)  journals  intended  cliieny  for  distribution 
among  business  men  abroad,  such  as  the  American  Ex- 
porter, Export  American  Industries,  Dun's  International 
Revieiv  and  Commercial  America.  Some  of  these  are 
published  in  several  different  Janguages. 

There  are  others,  such  as  Asia,  Pan-Pacific, 
Pan-American  Magazine,  etc.,  which  contain  informa- 
tion of  a  more  general  nature  interesting  to  exporters, 
but  are  not  published  specifically  and  solely  for  exj^ort 
traders.  The  daily  press  will  not  be  overlooked  by  the 
mde-awake  business  man.  Much  of  its  information  is 
that  origi  iially  published  by  the  government ;  on  general 
exchange  and  political  conditions,  however,  which  have 
a  very  distinct  bearing  on  market  conditions,  the  most 
up-to-date  information  can  be  secured  from  the  press. 

Lastl}^,  the  exporter  should  not  neglect  the  opportu- 
nity for  a  comprehensive  view  of  foreign  trade  organiza- 
tion and  methods,  as  well  as   the  pictures   of  general 


108    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

conditions  in  foreign  countries,  furnished  by  the  books 
pubhshed  upon  foreign  trade  topics.  Discrimination  is 
necessary  if  waste  of  time  is  to  be  avoided.  Most  of  the 
works  touch  only  the  high  spots ;  very  few  are  more  than 
superficial  nor  can  they  be  otherwise  in  attempting  to 
cover  so  broad  a  tield  in  limited  space.  The  foreign 
trade  bibliography  by  Herbert  Stanley  Shuey  and  pub- 
lications of  the  Department  of  Commerce,  the  various 
books  on  foreign  trade,  the  periodical  The  World' t^ 
Markets,  all  contain  lists  of  books  upon  various  foreign 
trade  topics,  organization,  methods,  and  markets.  Names 
and  titles  are  given  in  the  various  bibliographical  ref- 
erences and  in  the  bibliography  at  the  end  of  this  volume. 
The  most  complete  information  will  assist  but  will  not 
take  the  place  of  good  judgment.  The  formulation  of 
far-sighted  policies  with  reference  to  organization  and 
planniiig  for  more  than  the  immediate  future  are  neces- 
sary for  the  firm  which  expects  to  increase  its  foreign 
trade  in  satisfactory  measure  from  year  to  year.  The 
facts  and  information  derived  from  research  are  used 
for  both  planning  and  operation.  In  planning  for  export 
trade,  distinction  may  be  made  between  the  larger  plans 
for  developing  a  business  over  a  period  of  years  and  the 
detailed  plans  necessary  to  carry  out  portions  of  the 
major  or  master  plan.  The  master  plan  for  the  develop- 
ment of  export  trade  would  include  decisions  as  to  when 
particular  foreign  markets  were  to  be  opened  up,  at  what 
times  branches  in  established  markets  would  be  devel- 
oped, and  the  general  plan  as  to  development  of  methods 
of  distribution.  The  detailed  plans  would  include  a  study 
of  the  detail  necessary  to  determine  the  best  methods  of 
carrying  out  the  general  plan  of  entering  a  particular 
market,  the  planning  of  an  advei-fisiiig  campaign  for  a 
particulai"  market,  the  districting  of  sales  territories,  the 
routing  of  salesmen,  equipment  of  salesmen,  and  the  like 
— all  of  these  are  necessary  under  certain  conditions  to 
carry  out  the  major  plan  of  entering  a  particular  terri- 
tory. It  is  evident  from  what  has  been  said  that  the 
major  plans  will  ordinarily  require  the  sanction  of  gen- 


PLANNING  IN  EXPORT  TRADE  109 

eral  and  administrative  authorities,  because  the  charac- 
ter of  the  master  plan  depends  largely  upon  the  attitude 
of  the  board  of  directors  and  administrative  officials 
toward  the  long-run  development  of  foreign  sales. 

The  scope  of  research  and  planning  in  foreign  sales, 
the  methods  which  may  be  used,  and  the  sources  of  infor- 
mation are  indicated  in  the  following  outline: 

A.  Research  Methods.     Sources  of  Information. 

1.  Advisability  of  research  for  export  sales. 

Is  sales  research  possible  for  the  small  enterprise? 

How  can  the  small  enterprise  get  facts  upon  wliieh  to 
base  its  export  policies  aiul  opei'ations? 

To  what  extent  is  it  advisable  to  make  appropriations 
for  sales  research  ? 

To  what  extent  shall  statistical  or  research  departments 
handle  foreign  research?  Shall  a  research  department 
be  established  ? 

What  are  the  sources  of  information  for  all  industries ; 
for  particular  industries? 

2.  Personal  observation. 

Under  what  conditions  is  personal  observation  necessary 
or  particularly  advisable  ?    When  is  it  uiuiecessary  ? 

What  are  the  requisite  characteristics  of  the  investigator 
in  the  export  field  I 

How  can  the  results  of  personal  research  be  tested  for 
accuracy?  Are  they  of  sufficient  value  to  justify  main- 
tenance of  a  research  department  with  field  investi- 
gators ? 

3.  Correspondence  and  questionnaire. 

What  type  of  information  can  be  secured  through  corre- 
spondence and  questionnaire  methods? 

When  should  the  questionnaire  be  used  ?  What  are  its 
advantages  and  disadvantages? 


no    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

4.  Printed  sources. 

Which  of  the  various  printed  sources  are  the  most  reli- 
able? To  what  extent  can  they  be  relied  upon?  In 
what  particulars  are  they  faulty  or  insufficient? 

To  what  extent  must  printed  sources  of  information  be 
supplemented  by  other  facts  in  the  particular  line  of 
business  ? 

B.  Market  Analysis. 

1.  Market  analysis — products. 

How  can  the  manufacturer  test  his  products  as  to  qual- 
ity and  durability  ?  How  can  the  manufacturer  learn  all 
the  uses  of  a  particular  product  so  as  to  increase  the 
field  of  demand  ? 

IIow  is  the  manufacturer  to  learn  the  reaction  of  foreign 
dealers  and  consumers  toward  quality,  durability,  and 
style  of  the  product  so  as  to  increase  demand? 

How  are  the  selling-  points  which  will  be  most  effective 
in  foreign  markets  to  be  determined  ?  Which  are  to  be 
selected  for  empliasis? 

What  information  is  needed  to  ^letermine  the  policy  as 
to  selection  of  styles  or  models  for  foreign  markets  and 
where  is  this  information  to  be  secured? 

How  can  research  and  analysis  assist  in  determining  the 
effects  of  standardization  of  products  and  styles  upon 
export  sales? 

Wliat  information  is  needed  to  determine  methods  of 
offsetting  seasonal  variations  of  demand  in  foreign 
markets  ? 

How  are  containers  and  methods  of  packing  for  foreign 
inai'kcts  to  Ix'  planned? 

2.  Market  analysis — demand. 

Is  it  possible  to  estimate  the  actual  and  ]iotential  demand 
for  the  product  as  to  volume  of  denumd,  location  of 
buyers,  and  elasticity  of  demand? 

Fs  the  demand  stable  or  is  it  affected  by  financial,  sea- 
sonal, or  other  factors? 


PLANNING  IN  EXPORT  TRADE         111 

What  are  the  extent  and  nature  of  competition? 

What  are  the  requirements  for  the  satisfaction  of  de- 
mand with  respect  to  delivery?  With  respect  to 
credits  ? 

3.  Market  analysis — reaching  the  market. 

How  are  present  distribution  practices  for  particular 
products  to  be  determined  ? 

What  data  are  required  for  determination  of  policy  as  to 
sale  through  middlemen  ?  How  are  data  concerning  pro- 
spective consumers  to  be  secured? 

How  is  the  manufacturer  to  obtain  detailed  information 
as  to  retailers,  jobbers,  and  other  sales  agencies  which  are 
to  handle  his  product  ? 

C.  Research  and  Planning  in  the  Management  op  the  Sales 
Force. 

1.  Districting  of  sales  territories. 

How  should  export  sales  districts  be  laid  out?  What 
should  determine  the  number  of  sales  districts?  What 
considerations  atf ect  the  division  of  sales  territories  ? 

2.  Assignment  of  quotas  for  sales  districts  and  salesmen. 

Is  it  possible  to  apply  quota  plans  to  export  salesmen? 

Should  quotas  for  sales  be  assigned  to  export  salesmen  or 
to  export  sale  districts  for  the  business  as  a  whole  ?  If  so, 
what  should  be  the  basis  of  assignment  of  quotas  to  dis- 
tricts? How  sliould  quotas  be  made  up  for  export  sales- 
men ? 

3.  Routing  of  salesmen. 

With  a  given  number  of  salesmen  and  a  given  number 
of  customers,  how  ai-e  salesmen  to  be  routed? 

To  what  extent  should  salesmen  be  allowed  leeway  in 
the  routes  pi-escribed  by  the  home  office?  Why  is  this 
more  necessary  than  in  domestic  trade? 


112    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

4.  Planning  of  equipment  for  salesmen. 

What  equipment  is  necessary  for  export  salesmen  ?  How 
should  it  be  planned? 

D.  Research  and  Peanninc  in  Advertising. 

1.  Planning-  of  advertising  campaign. 

How  can  advertising  campaigns  be  so  planned  as  to  bring 
best  results?  To  what  extent  is  this  planning  the  func- 
tion of  the  export  department,  the  domestic  advertising 
department;  to  what  extent  that  of  the  advertising 
agency  in  cases  where  the  preparation  of  copy  and  man- 
agement of  space  are  not  handled  by  the  concern  itself? 

Why  is  the  choice  of  media  of  particular  importance  in 
foreign  trade  ?    What  research  does  it  involve  ? 

What  research  is  necessary  to  determine  details  of  copy, 
appeal,  illustration,  etc.,  for  the  various  foreign  markets? 

What  are  the  methods  to  be  guarded  against? 

2.  Planning  dealer  hel})s. 

To  what  extent  can  cooperative  advertising  between 
dealers  and  agents  and  the  manufacturer  be  employed? 

What  planning  is  necessary  to  get  the  best  results  from 
dealer  helps? 

What  research  is  desirable  to  determine  the  washes  of 
the  foreign  dealer  in  regard  to  assistance  from  the  home 
office? 

To  w^hat  extent  does  studj-  of  the  customs  and  desires 
of  the  foreign  final  consumer  influence  dealer  work  to 
be  undertaken  ? 

How  can  the  results  of  research  be  applied  to  the  prep- 
aration of  catalogues  and  other  product  literature? 

E.  Planning  and  Scheduling  Orders  and  Deliveries  to  Secure- 

Coordination  OF  Sales  and  Production. 


PLANNING  IN  EXPORT  TRADE  113 

F.  Planning  the  Complete  Sales  Campaign. 

What  are  the  elements  of  a  complete  sales  campaign? 

How  should  a  sales  campaign  for  a  given  product  be 
planned  ? 

How  are  periodical  advertising,  dealer  helps,  and  per- 
sonal salesmanship  to  be  correlated  and  coordinated  in 
a  sales  campaign  1  To  what  extent  does  direct-mail  ad- 
vertising play  a  more  important  part  in  the  foreign  than 
in  the  domestic  sales  campaign  ? 

What  research  is  necessary  to  provide  a  basis  for  an 
intensive  selling  campaign  ? 


Problem  25 

Brackett  Fire  Apparatus  Company — Field  Trips* 

The  Brackett  Fire  Apparatus  Company  of  New  York 
manufactures  and  distributes  one  of  the  leading  fire 
extinguishers  in  the  American  market.  In  1921  the  com- 
pany had  foreign  agents  in  the  following  South  American 
countries:  Argentina,  Brazil,  Chile,  and  Venezuela.  On 
August  15,  1921,  the  export  manager  of  the  Brackett 

*Upon  the  organization  and  methods  of  commercial  research  in  general, 
consult  Duncan,  Commercial  Research;  Frederick,  Business  Research  and 
Statistics;  White,  Marlcet  Analysis;  also  the  statistical  manuals  such  as 
Secrist,  Readings  and  Problems  in  Statistical  Methods;  King,  Elements 
of  Statistical  Method.  Percival  White  treats  foreign  market  analysis  in 
Chapter  XVIII  of  his  Market  Analysis.  Eeference  may  be  made  also  to 
the  following  articles  dealing  with  research  methods,  as  well  as  to  Hough, 
Practical  Exporting,  pages  13-36: 

Printers'  Int. 

June  5,   1919,  p.  159 — ' '  Investigate   First,   Then  Act,  in  Going  after 
China's   Trade." 

The   World's  Market. 

Oct.  1920,  p.  29— "Uniform  Statistics  Needed." 
National  Foreign  Trade  Council,  proceedings. 

1920,    p.    541,    Prof.    G.    B.    Roorbach— "A    New    Commodity    Class- 
ification for  Trade  Statistics. ' ' 
1920,  p.  532,  A.  L.  Rose— "The  Service  of  Business  Libraries." 
1918,  p.  422,  Ernest  F.  Du  Brul— "Direct  Contact  of  the  Seller  and 
the   Buyer   for   Gathering   Information. ' ' 


114    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

C^omi)aiiy  went  the  following  letter  to  the  foreign  service 
department  of  a  large  New  York  ])ank: 

"We  arc  seriously  coiisideriug'  sending  one  of  our  men  to 
South  America  to  appoint  agents  in  countries  where  we  have 
none  at  present  and  to  visit  the  agents  in  countries  where  we 
alread}^  have  connections.  This  trip  will  involve  a  considerable 
amount  of  money,  which  might  be  used  to  better  advantage  in 
another  way.  In  view  of  the  cause  of  business  depression  in 
most  of  the  South  American  countries,  in  view  of  the  rate  of  ex- 
change, and  other  conditions  influencing  business  relations  with 
the  United  States,  we  are  wondering  whether  we  would  be  doing 
the  right  thing  by  having  our  representatives  go  now  or  wait 
awhile,  until  conditions  have  become  better.  We  are  looking  at 
this  matter  not  so  much  from  the  standpoint  of  securing  results 
in  the  vague  future  as  that  of  assisting  our  present  business. 
It  is  of  course  apparent  that  a  trip  of  this  sort  will  always  be 
beneficial  to  us  and  it  will  help  to  promote  relations  between  our 
Latin  American  friends  and  this  company.  Would  we  secure 
immediate  results,  however,  under  existing  conditions  in  those 
countries  ? 

"We  should  appreciate  your  frank  opinion  on  this  subject." 

What  advice  should  have  been  given  at  this  time  to 
the  Br-ackett  Company"? 


Problem  26 

Gary  Typewriter  Company — Study  of  the  Market 

As  peace  among  the  new  nations  of  central  Knrope 
becomes  more  and  more  of  an  actuality  and  commerce 
and  industry  come  to  the  fore,  the  Gary  Typewriter 
Company  is  planning  to  enter  these  markets.  Altliougli 
this  firm  is  comparatively  new  in  the  typewriter  field,  it 
has  turned  toward  foreign  distribution  almost  from  the 
start.  It  has.  already  established  agencies  in  Kjugland, 
France,  Italy,  the  Scandinavian  countries,  Australia, 
New  Zealand,  and  China,  and  is  selling  to  a  limited  extent 
in  Latin  America.  The  Gary  Company  is  now  desirous 
of  entrenching  itself  in  those  portions  of  the  new  coun- 
tries of  Europe  which  are  the  most  profitable  and  to  that 


PLANNING  IN  EXPORT  TRADE  115 

end  is  planning  to  make  a  thorough  study  of  the  market 
for  typewriters  in  Poland,  Czecho-Slovakia,  Jugo-Slavia, 
and  Roumania. 

Ordinarily  the  Gary  Company  secures  government 
reports  as  to  the  prosperity  and  industrial  conditions  of 
a  country  which  it  intends  to  enter.  An  official  of  the 
company  is  then  sent  abroad  to  secure  first-hand  infor- 
mation, since  in  any  event  it  would  be  necessary  to  send 
such  a  representative  in  order  to  select  and^  appoint 
agents.  In  order  to  secure  as  much  information  as  pos- 
sible as. to  the  relative  desirabihty  of  the  different  sec- 
tions of  this  foreign  market,  this  man  tirst  confers  mth 
United  States  consuls.  He  then  visits  the  trade  and 
attempts  to  learn  what  competitors  are  doing,  how  long 
they  have  been  in  the  field,  and  to  what  extent  they  have 
secured  distribution  of  their  product. 

_  The  next  step  is  to  make  a  study  of  the  country  and 
pick  out  the  big  business  centers  where  a  demand  for 
Gary  typewriters  might  be  expected  to  develop.  In  each 
of  these  centers  the  company's  representative  visits  the 
individual  dealers  who  handle  typewriters  and  learns 
which  ones  are  tied  up  with  competitors '  lines.  He  also 
attempts  to  form  an  acquaintance  with  the  officials  of  the 
different  banks,  who  frequently  are  able  to  recommend 
dealers  who  would  serve  as  rehable  agents.  These  bank- 
ers also  are  often  sufficiently  well  informed  on  business 
conditions  to  assist  the  company's  representative  in 
forming  an  opinion  of  the  industrial  and  economical  con- 
ditions of  that  part  of  the  country.  From  his  past 
knowledge  and  understanding  of  the  other  markets,  the 
representative  is  usually  able  to  report  on  the  centers  in 
which  it  is  desirable  for  the  Gary  Typewriter  Company 
to  concentrate  its  efforts. 

A  study  of  this  kind  has  not  always  been  adequate 
however,  for  the  company  has  found  that  it  is  not  suffi- 
cient to  pick  out  large  industrial  centers  but  that  it  is 
necessary  to  know  what  classes  of  industries  are  being 
carried  on.  A  mining  town,  for  example,  might  have  a 
population  of  50,000,  but  its  abiUty  to  absorb  typewriters 
would  not  be  comparable  with  a  trading  center  of  half 


116    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  size.  Even  a  large  business  center  may  not  be  a  good 
market  for  typewriters  unless  the  people  are  educated 
to  their  use.  Out  of  7,000  lawyers  in  France  it  is  stated 
that  4,000  do  not  use  typewriters.  A  study  of  industrial 
conditions  is  also  necessary,  for  an  impending  coal  strike 
or  change  in  business  activities  may  reduce  a  dealer's 
possible  sales  by  more  than  half. 

What  changes  should  be  made  in  the  method  used  by 
the  Gary  Company  in  studying  the  foreign  market? 

Outline  the  steps  that  should  be  used  in  studying  the 
markets  in  Poland,  Czecho-Slovakia,  Jugo-Slavia,  and 
Roumania. 


Problem  27 

Rand  Safety  Razor  Company — Market  Analysis  in 
Selection  of  Agents 

When  in  1917  Mr.  J.  E,  Connell  was  appointed  export 
manager  of  the  Rand  Safety  Razor  Company  of  New 
York,  the  company's  blades  and  razors  were  being  sold 
in  a  number  of  foreign  markets  through  several  New 
York  export  commission  houses.  Having  developed  the 
domestic  market  intensively,  the  officials  of  the  company 
had  decided  to  devote  more  attention  to  the  foreign  mar- 
ket and  the  appointment  of  Mr.  Connell  was  the  first 
step  in  this  direction.  After  a  short  preliminary  study, 
Mr.  Connell  agreed  with  his  superiors  that  sales  would 
be  stimulated  in  many  foreign  markets  by  the  selection 
and  appointment  of  good  foreign  agents,  who  would  be 
given  exclusive  territory  wherever  it  seemed  that  they 
could  furnish  adeqnat'»  representation.  The  selection  of 
export  agents  is  not  an  easy  task,  even  when  the  export 
manager  is  in  a  ])()sition  to  visit  ])r()spects  personally;  it 
becomes  more  diflicult  when  decision  must  be  made  from 
material  available  in  this  country.  As  an  aid  in  organ- 
izing the  informatiou  avai]al)le  at  home  and  information 
to  be  gathered  abroad,  both  for  the  purpose  of  making 
initial  selection  and  keeping  in  touch  with  agents,  Mr. 


PLANNING  IN  EXPORT  TRADE  117 

Comiell  drew  up  two  forms,  the  first  dealing  wiih  gen- 
eral conditions  in  a  particular  market  and  the  second 
dealing  with  the  agent  selected  to  represent  the  Rand 
Company  in  this  market.     The  foTms  follow: 

MARKET  ANALYSIS  OF  A  FOREIGN  COUNTRY 


riTV                PROVTKPK 

A. 

_COUNTR  .'. 

General 

governing 
Information 

COUNTRY. 

Sources : 

1.  Population:  1860_ 

LS70 

1880 

1890_ 

1900 

1910 

1918_ 

2.  Number  of  Towns  of  3000  inhabitants  and  over: 

3.  Per  cent  of  population  livinji'  in  towns  of  3000  and  over: 

4.  Languages  Spoken : 

Per  cent  En<>'lish  Speaking : 
Per  cent  French  Speaking : 
Per  cent  German  Speaking: 

5.  Chief  Immigrant  Races : 

Race  Number  Economic  Activities 

6.  Economic  Dependency: 

Per  cent  of  Population  dependent  on — 

(a)  Manufacturing 

(b)  Agriculture 

(c)  Fishing 

(d)  Mining 

(e)  Commei'ce  and  trade 


118    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

7.  Standards  of  Living — General  Conditions 

What  luxuries  are  found? 

What  per  cent  of  population  enjoy  them? 

Is  the  population  free-spending  or  frugal? 

8.  General  Attitude  Towards  American  Goods 

9.  Dealers'  Attitude  Towards  American  Goods 

10.  Effect  on  Population  of  Various  Kinds  of  Advertising 

11.  Natural  Resources 

12.  Industrial  Development 

To  what  extent  has  capital  been  invested,  and  does  it 

promise  to  be  invested  ? 
In  what  lines? 
By  native  or  foreign  capital  ? 

13.  Future  Development  and  Purchase  Power 


14.  Imports  from  Exports  to 

1!)00 1910 1918  1900 1910 1911 

United   States 

England 


Germany. 


1.').  What  Has  Been  the  Benefit  of  the  War? 
16.  Number  of  Foreign  Travelers  Annually? 

B.  Demand  for  Rand  Safety  Razors 

1.  Shaving  Age — Number  of  Males  of  Shaving  Age 

2.  Number  of  New  Shavers  Annually 

3.  Shaving  Habits: 

(a)  Frequency  of  Shaving 

(b)  Type  of  razors  generally  used 

(c)  Cost  of  razors  generally  used 


PLAXMXG  IX  EXPORT  TRADE  ]19 

(d)  Lathei-  matei-ial  on  market 

(e)  Niimbei-  of  barbers  per  1000  .Males  of  ►Shaviiij.-  Age 
Number  of  shops  per  1000  Males  of  Shaving  Age 
Class  of  Shops 

4.  Wage  Range  of 

(a)  Unskilled  Labor 

(b)  Skilled  Labor 

(c)  Clerks 

(d)  Salaried  Workers 

.3.  Number  of  Males  of  Shaving  Age  receiving  economic  eouiv- 
alent  of  $1200  U.  S.  Money  . 

6.  Number  of  M.  S.  A.  receiving  equivalent  of  $2000 

7.  What  is  the  purcluising  power  of  $5,000 .' 

8.  Estimated  number  of  potential  customers 

9.  Physical  or  other  recurrent  conditions  affecting  purchasin"- 

power  ° 

10.  Annual  per  capita  pui-ciiase  of  sugar  cott'ee  shoes 

11.  Prize  card  and  premium  i)ossibilities 

Is  there  a  governnu'iit  lottery.' 
Local  lotteries .' 

C.  Distribution 

1.  According  to  A-14,  imports  of  greatest  values  come  from 

Reasons,  credits,  personal  contracts,  service 

2.  Suggestions  looking  to  importation  of  maximum  number  of 

Kand  s 

3.  Media  of  Distribution: 

Kind  and  number  of  each — 

Wholesaler 

Jobber 


Importer- 
Retailer— 


120    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

4.  Which  is  the  best  means  of  distribution  for  Rand,  and  why? 

United  States  exporter,  local  importer,  resident  agent, 
commission  merchant,  salesmen,  or  direct 

5.  Reliable  houses  with  which  to  do  business 

6.  Tariffs 

7.  Transportation : 

(a)  Ocean  shipping  lines 

(b)  International  transportation  facilities. 

8.  Credits 

9.  Method  of  financing  in  general 

D.  Competition 

1.  Sources  of  present  razor  supply 

2.  Kinds,  styles,  cost,  selling  price 

3.  Extent  of 

4.  Amount  of  aggressiveness  shown  by  other  companies 

5.  Competitors'  methods  of  distribution 

(i.  Competitors'  Advertising: 

(a)  Extent 

(b)  Methods 

(c)  Media 

(d)  Placed  by  whom 

PART  II 
A.  Source 

1.  Name 

2.  Full  Address 


PLANNING  IN  EXPORT  TRADE  121 

3.  Nature  of  business : 

(a)  Wholesale 

(b)  Jobber 

(c)  Retail 

4.  Number  of  years  in  business 

5.  Affiliations 

6.  Merchandise  Carried — Place  of  Purchase 

7.  Number  of  salesmen — Gross  business,  1918 

8.  Foreign  concerns  dealt  with 

9.  References 

B.  Razors 

1.  Do  you  carry  Rand  Razor  Blades? 

If  so,  give  number  sold  in  1917  1918 

If  not,  why? 

2.  Other  brands  handled — In  what  quantity? 

3.  Where  purchased 

4.  Cost 

5.  Most  popular  style  and  sets 

6.  Price  at  which  Rand  is  sold 

7.  Style  suggestions 

8.  Should  the  Rand  Company  have  supply  on  hand? 

(a)  Locally? 

(b)  Why?' 
(e)   Where? 

9.  Suggestions  on  packing 
10.  Suggestions  on  shipping 


122    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 
C.  Expense,  Terms.  Credit 

1.  What  are  your  razor  purchases  a  year? 

2.  What  is  average  cost  of  doiug  busiuess? 

What  is  cost  of  doiug  Kaiid  business.' 
o.  What  are  the  methods  of  providing-  for 

(a)  Insurance 

(b)  Freight 

(c)  Duty 

(d)  Storage 

A.   Do  jol)l)ers  cluirge  retailers  carrying  expenses  on  all  goods'.' 

5.  What  terms  are  allowed  the  jobber! 

6.  What  is  standing  of 

(a)  Jobber 

(b)  Foreign  Exporter 

(c)  Local  Importer 

(d)  Commission  Men 

7.  Would  Jobber  prefer  to  l)uy  dii-ect? 

8.  Wouhl  retailer  prefer  to  buy  direct? 

9.  Are  Rand  discounts  satisfactory? 

Suggested  changes 

10.  What  should  be  the  avei-au'c  monthly  purchase? 

11.  How  often  do  you  want  to  buy  ? 

12.  Credit  terms : 

(a)  Cash  against  documents  in   I'nited  States 

(b)  Cash  with  order 

(c)  Sight  draft 

(d)  Bank  letter  of  ci-edit 

(e)  Open  account 

Which  of  above  bases  is  most  general  method? 
Which  is  most  desirable  to  purchaser? 
On  which  have  Rand 's  been  purchased  ? 


PLANNING  IN  EXPORT  TRADE  123 

D.  Advertising 

1.  Do  you  use  window  displays! 

2.  Illustrations? 

3.  C'atalogs  ?     What  languao-e  ? 

4.  Opinion  regarding  outdoor  advertising 
.").  Reading  magazines— What  si)ace  best"? 

0.  Leading  newspapers — What  space  best? 

7.  What  American  manufaetui'ers  advertise? 

8.  How  placed? 

9.  Remarks 

E.  Miscellaneous 

1.  How  can  old  ways  of  doing  business  be  improved? 

2.  General  summarv  Remarks 


111  the  case  of  Aro'entiiia  and  other  South  American 
countries  it  is  Mr,  Coniieli's  ph^ii  to  supplement  infor- 
mation available  from  various  sources  in  this  country 
by  a  personal  trip.  However,  before  he  was  able  to  visit 
the  countries  personally,  a  request  came  from  a  Buenos 
Aires  wholesaler  asking  for  exclusive  representation  for 
Argentina,  proposing  a  ten-year  contract,  guaranteeing 
a  substantial  volume  of  sales  through  its  period,  and 
including  a  very  strong  recommendation  from  the  man- 
ager of  a  branch  of  a  very  important  American  bank. 
The  proposal  required  a  prompt  answer.  The  problem 
before  the  export  manager  is  how  to  get  sufficient  infor- 
mation to  make  some  decision. 

AVhat  information  would  be  useful  in  addition  to  that 
upon  the  points  included  in  the  outline"? 


124     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  28 

BuRBANK  Adding  Machine  Company — Desk  Research  Versus 
Field  Research 

The  Burbaiik  Adding  Machine  Company  is  planning 
to  enter  the  Australian  market.  This  step  is  in  line  with 
the  program  of  the  company  for  expanding  its  foreign 
sales.  By  means  of  intensive  sales  efforts  and  national 
advertising  campaigns  the  firm  already  has  built  up  a 
substantial  volume  of  business  in  Canada,  and  some 
effort  has  been  expended  in  developing  sales  in  Latin 
America,  particularly  in  Mexico  and  Cuba.  Inasmuch 
as  Australia  approximates  more  closely  than  any  other 
country  conditions  prevalent  in  the  domestic  market,  it 
appears  to  be  the  logical  choice  as  the  next  field  to  be 
entered.  Before  a  final  decision  is  reached,  however,  the 
company  wishes  to  have  a  comprehensive  report*  regard- 
ing the  market  for  their  product  in  Australia,  but  they 
wish  to  secure  these  data,  if  possible,  without  going  to 
the  expense  of  sending  a  field  investigator. 

*Whatever  the  trade  rejjiou  or  specific  market,  there  are  many  points 
upon  whicli  the  exporter  wishes  to  be  continuously  informed.  The  following 
outline,  submitted  by  Mr.  Burwell  Cutler,  former  chief  of  the  Bureau 
of  Foreign  and  Domestic  Commerf-e,  suggests  a  number  of  tliem : 

(a)  Population  figures. 

(1)  Eacial   predominance. 

(2)  Percentages  of  other  metal   stocks. 

(3)  General   literacy   or   state   of   public   education.      (A   very  vital 

point    in    advertising,    display    methods,     personal    approach, 
etc.) 

(4)  Predominant    employment,    whether    industrial,    agricultural,    or 

mercantile. 
(.5)   Percentages  of  other  vocations  and  professions. 

(b)  Purchasing   power   per   capita. 

(c)  Character  of  banks,  whether  liberal  or  conservative. 

(d)  Merchandising   customs. 

(1)  Character    of    stores,    wlietlicr    dcpartineiit    stores    or    shops    or 

other  sales  methods. 

(2)  Payment   habits,    whether    by    cash    or    credit    predominantly. 

(3)  Local    delivery    requirements. 

(_4)  Use  of  sales  floors  or  warehouses.  (That  is,  do  the  merchants 
put  the  greater  part  of  their  stocks  in  one  place  or  the 
other;  some  display  only  a  few  samples  and  deliver  from 
warehouse.) 

(5)  The  use   of  advertising   mediums   and    outside   solicitation. 


PLANNING  IN  EXPORT  TRADE  125 

The  export  manager  knows  that  he  can  secure  general 
information  upon  customs  and  habits  of  the  people  from 
a  variety  of  sources  including  year-books,  books  of  travel 
and  descriptions  of  the  various  countries,  not  to  mention 
the  reports  of  Government  officials  published  both  as 
Consular  Reports  and  currently  as  Commerce  Reports. 
More  detailed  information  as  to  population  may  be 
secured  from  Census  Reports,  which  give  population  by 
districts  and  classes  and  sometimes  give  the  character 
and  value  of  products  in  native  industries,  their  location, 
etc.**  Convenient  compilations  such  as  the  Statesmen's 
Yearbook  and  the  Gazetteer  of  Foreign  Markets  contain 
some  of  this  information  in  summarized  form.  Upon 
banking  conditions,  as  upon  tlie  other  factors  determin- 
ing the  market  at  a  particular  time  local  banks  through 
their  correspondents  may  secure  some  information,  while 
the  Department  of  Commerce  also  makes  it  a  point  to  be 
informed  upon  all  such  matters.  Lists  of  dealers  and 
lists  of  manufacturers  of  various  types  may  be  made  up 
on  the  basis  of  such  foreign  directories  as  Kelly's  Direc- 

(e)  Banking  facilities. 

(1)  Are    the     banks     primarily     absorbed     in     financing    crops     or 

factories  ? 

(2)  Are    they    generally    conservative    or    liberal^       (This    has    a 

bearing  on  the  individual  purchasing  ability  if  ready  money 
awaits  the  marketing  of  crops  or  can  be  borrowed  in  antic- 
ipation of  them.) 

(3)  The  proportion  of  banks  or  other  financial  agencies  that  accept 

mortgages  on  real  estate.  (Liberality  in  this  respect  creates 
more  fluid  conditions  of  purchasing  power  among  the  public 
and  stabilizes  local  conditions.) 

(f)  Transportation  facilities. 

(1)  What  water,  rail,  and  trolley  lines  exist  and  carry  package 
freight?  (On  this  question  hinges  much  of  the  marketing 
problem  in  the  smaller  commodities,  since  they  are  readily 
distributed  over  a  wide  radius  from  warehouse  centers.) 

**Copies  of  these  reports  are  on  file  in  the  larger  libraries  of  the  country 
which  cater  to  business  needs,  and  in  the  Bureau  of  Foreign  and  Domestic 
Commerce  in  Washington,  D.  C.  Monthly  reports  of  European  countries  on 
exports  and  imports  for  any  one  month  can  be  secured  from  a  month  and  a 
half  to  two  montlis  later.  Yearly  reports  of  South  American  countries  vary 
considerably,  Argentina,  Brazil,  and  Chile,  being  from  four  to  six  months 
late;  Venezuela  ten  montlis  late;  Peru,  Bolivia,  and  Columbia,  a  year  late. 
Yearly  reports  from  Japan  are  two  and  a  half  montlis  late;  South  Africa 
four  months  late,  and  China  one  year  late. 


126    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

tory  of  Alercbaiits,  IMannfacturers  and  Shippers  of  the 
World,  the  French  directory  Didot-Bottin,  or  the  Ger- 
man directory  Beichs  Addressbuch.  In  addition  to  such 
general  directories,  classified  directories  containing  lists 
of  principal  business  houses  along  certain  lines  may  be 
secured,  among  which  may  be  mentioned  the  Interna- 
tional Bank  Directory  containing  lists  of  banks  all  over 
the  world,  lists  which  would  contain  a  large  number  of 
prospects  for  adding  machines.  Tariff  information  may 
be  secured  from  the  Department  of  Commerce  and  its 
publications,  likewise  from  the  comprehensive  guide 
called  "Kelly's  Customs  Tariffs  of  the  World."  The 
Commercial  Laws  Division  of  the  Department  of  Com- 
merce might  be  invoked  to  give  the  legal  requirements 
concerning  trade-marks,  collections,  days  of  grace 
allowed  on  financial  transactions,  etc.  The  export  man- 
ager likewise  knows  that  there  are  half  a  dozen  different 
sources  from  which  credit  reports  may  be  secured,  which 
are  extremely  valuable  in  checking  up  other  lists  of 
dealers,  agents,  or  prospects.  The  Philadelphia  Com- 
mercial Museum,  the  National  Association  of  Manufac- 
turers, the  Foreign  Credit  Interchange  Bureau,  R.  G. 
Dun  &  Co.,  concerns  which  furnish  credit  insurance  and 
the  banks  may  be  mentioned  as  sources  of  prime 
importance.  Shipping  information  and  special  require- 
ments of  various  sorts  can  be  found  conveniently^  in  the 
p]xporters'  Encyclopedia.  From  these  sources  and  from 
maps  and  other  detailed  reports  it  seems  possible  to 
determine  the  approximate  immber  of  prospective  cus- 
tomers, to  make  out  a  salesman's  itinerary,  and  to 
interest  these  prospective  customers  by  a  preliminary 
mail  campaign;  nevertheless  it  is  also  evident  that  most 
of  these  data  are  from  six  months  to  a  year  or  more  out 
of  date.  Inasmuch  as  representatives  will  eventually  be 
sent  to  inti-v)(hice  the  product  and  to  appoint  agents,  a 
counterplan  has  been  proposed — that  the  company  should 
at  once  send  such  a  representative  abroad  to  study  con- 
ditions and  to  report  on  the  pr()bal)le  sales  in  this  field. 
Later  when  agents  have  been  appointed  to  represent  the 
company,  an  advertising  and  circularization  campaign 


PLANNING  IN  EXPORT  TRADE  127 

could  be  carried  on  which  would  effectively  tie  up  Bur- 
bank  Adding  Machines  with  the  name  of  the  local  agent. 
Since  the  company  has  found  in  the  domestic  market  that 
effective  selling  demands  that  the  sales  manager  know 
his  territory  from  actual  experience,  it  would  seem  rea- 
sonable that  the  same  policy  would  be  successful  in  the 
Australian  field. 


Problem  29 

The  Self-Operating  Scale  Company — Market  Analysis  of 
Australia  and  Argentina 

Because  of  the  supply  of  comparatively  cheap  labor  in 
most  foreign  countries  and  the  unfamiliarity  of  foreign 
consumers  with  package  goods,  the  Self-Operating  Scale 
Company  sold  few  of  its  automatic  packing  machines 
abroad  prior  to  1914.  With  the  war,  however,  came  a 
radical  change  in  the  labor  situation  in  England  and  on 
the  Continent;  several  million  men  were  called  to  the 
colors;  women  were  compelled  to  fill  their  places;  and 
wage  scales  rose  rapidly.  Tlie  introduction  of  package 
goods  from  America  served  to  increase  their  use  and 
help  to  break  down  the  prejudices  of  many  consumers. 
With  the  depression  in  the  domestic  market  in  1920,  the 
company  became  convinced  of  the  necessity  for  develop- 
ing new  markets  for  its  machines  abroad.  Agents  were 
accordingly  appointed  in  France  and  England;  and  by 
June,  1922,  the  British  business  of  the  company  had 
increased  so  ra])idly  that  a  branch  was  established  in 
London.  The  firm  is  now  planning  to  extend  its  sales 
efforts  to  Argentina  and  Australia,  but  before  it  is  defi- 
nitely committed  to  this  step  it  is  desirous  of  securing 
information  on  the  following  points : 

Is  there  sufficient  need  for  automatic  packing  machin- 
ery in  Australia  and  Argentina  to  warrant  the  develop- 
ment of  these  markets  by  the  company?  If  so,  should 
the  company  establish  branches,  appoint  agents,  or 
develop  the  territory  by  advertising"?    If  advertising  is 


128    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

to  be  used,  should  it  be  directed  to  manufacturers,  or 
should  it  be  directed  to  consumers  in  order  to  educate 
them  to  the  advantages  of  package  goods'?  How  can  the 
names  of  possible  buyers  of  the  product  be  obtained? 

The  Self-Operating  Scale  Company  manufactures  a 
line  of  automatic  machines  used  for  filling  two  to  five- 
pound  cartons  with  such  products  as  sugar,  rice,  coffee, 
soajJ  powder  and  flakes,  and  for  tilling  flour  bags  up  to 
fifty  pounds  capacity.  Although  it  is  rapid  and  accurate 
in  operation,  the  apparatus  is  not  adapted  for  such  prod- 
ucts as  crackers,  cookies,  or  candy.  The  company  also 
manufactures  a  device  which  automatically  lines  the 
inside  of  cartons  with  a  thin  coating  of  paraffin.  Since 
most  of  these  machines  are  large  and  of  intricate  mech- 
anism, a  high  degree  of  technical  skill  is  necessary  in 
order  to  install  or  repair  them  or  explain  their  operation. 
But  few  parts  of  the  machines  are  standardized,  as  the 
cartons  used  by  different  manufacturers  vary  in  size  and 
shape.  The  company  is  convinced  that  many  manufac- 
turers can  box  their  products  cheaper  at  their  factories 
than  the  retailers  can  sack  the  product  in  their  stores, 
but  inasmuch  as  the  machines  cost  from  ten  to  fifteen 
thousand  dollars  each,  their  use  is  limited  to  large  manu- 
facturers. At  present,  because  these  machines  are  a 
comparatively  new  development,  the  company  has  but 
few  competitors  in  either  the  United  States  or  England. 

When  an  agent  was  appointed  in  England  in  1919,  the 
company  circularized  a  list  of  prospective  customers 
which  it  obtained  from  the  Philadelphia  Commercial 
Museum;  it  also  advertised  in  one  of  the  large  English 
engineering  journals.  At  the  same  time  an  agent  who 
Avas  appointed  in  Paris  to  cover  eastern  Europe,  also 
handled  a  non-competing  line  of  automatic  chocolate 
machinery.  Here  again  the  company  circularized  pro- 
spective customers  and  advertised  in  the  Journal  Seville 
which  had  a  circulation  among  engineers.  In  June,  1922, 
•a  sales  branch  and  warehouse  for  repair  parts  were  estab- 
lished in  London.  Three  reasons  prompted  this  move: 
The  country  was  densely  populated;  there  were  more 


PLANNING  IN  EXPORT  TRADE  129 

large  mamifacturers  in  England  who  could  profitably  use 
these  machiues  than  in  any  »'ther  country  except  the 
United  States;  and  the  use  ol'  package  goods,  although 
not  far  advanced,  was  ])rogress!ng. 

In  the  same  month  the  conii)any  liad  a  moving  picture 
film  produced  showing  its  machines  in  operation  in  sev- 
eral large  manufacturing  plants  in  the  United  States. 
This  film  was  displayed  in  England  with  the  following 
results:  It  demonstrated  to  prospective  customers  how 
the  machines  operated;  it  gave  prestige  to  the  company 
through  showing  its  machines  in  operation  in  the  largest 
plants  in  the  United  States;  and  it  demonstrated  to  the 
English  consumer  the  advantages  of  using  package  goods. 
These  films  were  also  shown  on  the  Continent  where, 
because  of  the  conservative  attitude  of  consumers  and 
few  factories  adapted  to  the  production  of  package 
goods,  the  company  has  not  deemed  it  advisable  to  open 
a  branch;  it  has,  however,  retained  its  agent  in  Paris, 
and  has  attempted  to  develop  sales  mainly  through 
advertising. 

In  the  development  of  Australia  and  Argentina,  the 
company  is  at  a  loss  as  to  what  steps  to  pursue.  Both 
these  countries  are  newly  developed,  and  are  reported  to 
be  advancing  along  the  same  lines  as  the  United  States. 
A  rapid  development  of  railroad,  telephone,  and  tele- 
graph systems  has  taken  place.  In  reaching  a  decision 
on  the  Australian  and  Argentine  markets,  the  company  is 
handicapped  by  a  lack  of  information,  its  actual  knowl- 
edge of  these  fields  being  limited  to  the  following  facts: 

The  population  of  Australia  increased  from  4,918,632 
in  1916  to  5,412,31  S  in  1920.  According  to  the  last  report, 
4,371,511  are  located  in  the  three  states  of  New  South 
Wales,  Victoria,  and  ^^)ueensland.  The  number  of  fac- 
tories increased  from  14,455  in  1911,  with  311,710 
employees,  to  16,291  in  1920,  with  376,734  employees. 
Of  the  16,291  factories,  201  were  flour  mills,  employing 
3,733  workers  and  producing  1,050,228  tons  of  flour,  and 
35  were  sugar  mills  and  refineries  employing  4,517  work- 


130    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ers  and  producing  238,428  tons  of  refined  sugar.  Because 
of  its  coal  su|)i)ly,  the  country  is  in  position  to  develop 
]*apidly  industrially,  but  although  machinery,  agricul- 
tural implements,  glassware,  and  other  products  are 
manufactured,  sugar  and  flour  are  the  only  important 
products  for  which  the  machines  of  the  Self-Operating 
Scale  Company  may  be  used  economically. 

The  population  of  Argentina  increased  from  6,881,311 
in  1913  to  over  8,000,000  in  1920.  Over  half  the  people 
are  located  within  200  miles  of  Buenos  Aires.  In  1913 
there  were  48,779  factories,  of  which  408  were  flour  mills 
having  a  maximum  annual  capacity  of  2,143,910  tons  and 
employing  4,939  persons,  and  43  were  sugar  mills  and 
refineries  employing  42,163  workers  and  producing 
150,402  tons  of  refined  sugar.  Argentina  is  primarily 
an  agricultural  countiy,  producing  for  the  most  part 
dairy  products,  hides,  wool,  and  meat.  As  in  the  case  of 
Australia,  the  two  chief  industries  capable  of  using  the 
machinery  produced  by  the  Self-Operating  Scale  Com- 
pany are  sugar  and  fiour.  The  lack  of  coal  and  water 
power  has  tended  to  prevent  the  development  of  large 
scale  production  although  it  is  reported  l)y  travelers  in 
Argentina  that  rapid  strides  in  industrial  development 
have  been  made  since  the  war.  On  the  whole,  however, 
the  exports  of  Argentina  consist  largely  of  raw  materials. 


Problem  30 

The  James  &  King  Company — Analysis  of  South  American 
Market  for  Photographic  Material 

The  James  &  King  Company  manufactures  a  line  of 
small  cameras  for  amateur  photography,  ranging  from 
the  smallest  or  pocket  size  to  more  pretentious  equip- 
ment nniking  pictures  5x7  inches  in  size.  In  addition  to 
cameras  and  fittings,  the  comi)any  also  sells  a  line  of 
supplies  for  amateur  photography  consisting  of  sensi- 
tized films  and  plates,  chemicals  and  chemical  compounds, 
and  apparatus  for  developing  negatives  and  finishing 
pictures. 


PLANNING  IN  EXPORT  TRADE  131 

The  company  has  maintained  one  salesman,  who  has 
traveled  the  east  coast  of  South  America  with  a  degree 
of  success  which  though  moderate  was  sufficient  to  lead 
the  company  to  believe  that  more  intensive  cultivation 
of  the  Soutli  American  market  might  result  in  perma- 
nent and  proiitable  business.  With  this  idea  in  mind  the 
assistant  sales  manager,  w^ho  has  been  in  charge  of 
export  transactions,  was  asked  to  gather  data  and  pre- 
sent a  report  on  the  proposition  to  establish  one  or  more 
branches  in  South  American  cities.  After  collecting 
information  from  various  sources,  the  recommendation 
was  made  that  a  branch  should  be  established  first  at  Rio 
de  Janeiro,  next  at  Buenos  Aires,  and  the  third  in  Chile, 
preferably  at  Valparaiso.  The  basis  for  this  recommen- 
dation was  his  conclusion  that  South  America  offered  a 
market  for  photographic  materials  in  the  order  men- 
tioned. His  method  of  approach  to  the  problem  is  indi- 
cated in  excerpts  from  his  report,  as  follows : 

The  countries  covered  in  this  study  are  those  of  continental 
South  America :  Argentina,  Brazil,  Chile,  Colombia,  Ecuador, 
Uruguay,  Peru,  Venezuela,  Bolivia,  Paraguay,  and  the  Guianas 
— British,  Dutch,  and  French.  The  analysis  of  each  country 
and  the  comparison  of  their  purchasing  power  are  based  upon 
statistics  whose  value  is  uncertain.  Population,  the  most 
important  factor  in  determining  the  market  for  photographic 
materials,  can  be  only  approximately  ascertained  in  many 
cases.  Few  recent  censuses  by  actual  count  have  been  taken, 
and  estimates  for  the  various  countries  vary  widely.  For 
instance,  a  recent  unofficial  estimate  of  the  Brazilian  Census 
Bureau  gives  the  population  of  that  country  as  30,553,509  for 
1921.  Mark  Jefferson,  in  a  scientific  forecast  of  population 
growth,  judged  that  the  1920  figure  for  Brazil  w^ould  be 
20,100,000.*  Other  estimates  fall  between  these  extremes,  and 
similar  divergent  cstimalcs  arc  found  I'oi-  most  of  the  other 
countries. 

Other  iiilci'iial  slalislics  arc  likewise  of  somewhat  uncertain 
accuracy,  or  arc  lacking  altogethci-.  The  attempt  has  been 
made,  thei'efore,  to  use  the  information  found  in  various 
United  States  Government  I'eports  as  far  as  ])ossible.  These 
reports  may  be  considered  to  be  accurate  and  liave  the  advan- 
tage of  being  unprejudiced.  Where  possible,  the  same  source 
of  information  has  been  followed  throughout. 

*Bulletiu  .Amer,  Geog.  Society,  Vol.  46,  No,  6,  1914. 


132    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Figures  of  the  foreign  trade  of  the  countries  studied  are  also 
found  to  differ  somewhat  in  various  reports.  Thus  in  Argen- 
tina, impoi'ts  and  exports  were  formerly  valued  on  an  artificial 
"tariff"  scheduk\  which  remained  constant  from  1906  to  1917. 
In  the  latter  year  real  market  values  were  substituted,  and  the 
previous  figures  corrected  back  to  1910.*  Some  reports  give 
one  set  of  values  and  others  give  the  other.  Consequently 
large  apparent  discrepancies  are  found  in  different  works.  The 
uniform  source  selected  for  these  figures  is  the  Supplements 
to  Commerce  Reports,  published  by  the  United  States  Govern- 
ment, and  the  subsequent  reports  correcting  these  Supplements 
when,  as  in  the  case  of  Ai-gentina,  previous  values  have  been 
invalidated. 

The  comparison  of  the  purchasing  powers  of  the  various 
countries  is  based  primarily  upon  the  foreign  trade  which 
those  countries  do  with  the  world  at  large,  and  with  the  United 
States.  The  amount  which  any  nation  can  sell  abroad,  and  the 
net  amount  which  it  can  im])ort  as  a  result  of  that  exportation, 
are  the  real  gauge  of  its  ])urcliasiug  power.  The  exports  measure 
the  gross  buying  power.  From  those  exports  the  nation  pays 
others  for  capital  borrowed  from  them,  and  services  performed 
by  them  for  it.  Over  a  period  of  time,  then,  the  volume  of 
external  trade  of  a  country  becoincs  tlic  measure  of  its  ability 
to  buy  abroad. 

The  actual  analysis  of  the  market  for  photographic  materials 
in  the  various  countries  is  necessarily  a  broad  one.  It  has  not 
been  found  possible  adequately  to  determine  the  exact  classifi- 
cations of  the  photographic  supplies  imported  into  the  South 
American  countries,  from  their  own  import  figures.  These 
figures,  available  in  oidy  a  few  countries,  do  not  differentiate 
between  the  numerous  groups  into  which  photographic  mate- 
rials naturally  fall.  Nor  do  the  export  statistics  of  the  United 
States  lend  thems;'lves  to  any  distinction  between  the  two  chief 
groups  of  goods,  amateur  and  pi'ofessional. 

To  make  compai'isons.  therefore,  it  is  necessary  to  include 
all  kinds  of  materials  in  the  study,  except  exposed  motion  pic- 
ture film,  which  may  readily  be  omitted  in  all  cases  and  the 
sale  of  which  is  distinct  from  tlie  sale  of  unnsed  supplies.  It 
has  been  attempted  to  t'stiniatc  the  ])ossil)le  consumers  of 
amateur  supplies  priiiiai'ily,  on  tlie  assuni])tiou  that  this  group 
includes  also  all  cojisuiuers  of  oilier  kin<ls  of  material.  This 
procedure  allows  of  comparisons  of  the  total  amounts  of  pho- 
tographic goods  imported  into  each  country  from  the  United 
States  on  the  basis  of  per  capita  consumption. 

*Special  Agents  Series  No.  88,  U.  8.   Dept.  of  Com.,  p.  86. 


PLANNING  IN  EXPORT  TRADE 


133 


Two  standards  have  been  set  up  to  make  this  comparison. 
I  he  first  IS  the  per  capita  consumption  of  all  classes  of  mate- 
rials m  the  United  States,  distributed  among  the  total  popu- 
lation. The  year  1914  is  used,  being  the  date  Sf  the  last  Census 
ot  Manufactures.  The  population  is  taken  at  100,000  000  this 
being  a  convenient  point  between  the  92.000,000  given  by  the 
Census  of  1910  and  the  105,000,000  given  by  that  Sf  1920  The 
n  f  J^^L?^'^?,  consumption  is  arrived  at  as  follows.'  The 
United   States   Census   of  Manufactures  for   1914   shows   that 

£7  14«  «7fi^  'f  '^^^-  '"^P.^"^''  '''''''  $2,913,000;  exports  were 
*/,i4S,«/b  and  re-exports  of  foreign  imports  w^ere  .$'^7  900** 

$37579  000  "'f  '1^^  f«/ /domestic  consumption  oV^bout 
$35,079,000.  For  the  total  population  of  the  United  States 
io'q?fi'  't^'-*''  consumption  in  1914  is  thus  found  to  have  been 
,hn     \:  J        ,"'"'''  "'^'^^  ^®  ^^^^"  a«  approximately  correct 

Imnort.  int"  ^t  ff '"  P^'o^^^^ction  is  for  the  calendar  year. 
Impoi  s  during  the  fiscal  year  were  probably  consumed  during 
the  calendar  year    since  the  latter  half  of  the  calendar  yeai- 

hnpSion!'  '"''"''''  ''  ''''  ^"^"P^^^^  ^^^'  --  -^T  little 
The  second  standard   of   comparison   is  the  iDcr  canita  eon 
sumption  of  photographic  supplies  among  what^mayb^e  termed 
the  probable,  or  theoretical,  number  of  actual  consumed      To 

mtraccm-r'^  "  '''  ^'"1"^^  ^^^^^^'  ''  ''  -^i-^^^d  that  the 
most  accurate  age  group  is  that  between  the  ao-es  of  15  and  50 

including  both  sexes.     While  many  sales  are  made  to  persons 

50  nrob.n'="'-  '''''T'''  ''  ''''  ^^^»-  ^^-^^P'  betwe  n  15  and 
Unit^Pd  ^t  I  ^'r'  ^^'  'Z''^  '''''''^'''  ^^  P^tenlial  buyers.  The 
I  nited  States  Census  of  1910  shows  that  approximately  52 
per  cent  of  he  total  population  are  within  this  15  to  50  a^e 
jroup,   or   .2,000,000   in    1914.     Illit.erates  are  shown   by  ?he 

rerrsdd'whi:i''"'*nl'  '■'  ^"^'  ^^"^  ''  the  people  o'4  10 
refinement  of  fh'''''f  ^-  «?"^^4  000,000  people.  No  further 
refinement  of  the  market  is  feasible,  since  in  the  South  Amer- 

nos  il'r  ''  "'  ^'''''''''  '''  ^^^'^il^ble  which  would  make 
pavs.b  e    corresponding    refinement.      Almost    every    person    of 

m  v' be  T^  1  r''""  ^^"'  "^^"  '^  literate  and  fina'I.cfall     able 

sumpS^^^SLti  piu'jrS^^h'fi  ''"  'V'  T- 
second  ^t-.nrl«v,i  ^f'  '^O-Ve,  the  figure  used  as  the 

bfcond  sTaiuiarti  ot  comparison. 

*U.  S.  Census  of  ]\r;,nuf:,c-turo.s,  1914,  pp.  236  and  2nC. 
**Coinnierce  and  Navigation  Ecports,  U.  S.  Dept.  Com.,  1914. 


134    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

In  determining  upon  the  relative  importance  of  the  differ- 
ent countries  as  markets  for  United  States  photographic  mate- 
rials, no  account  has  been  •  taken  of  the  characters  of  the 
governments.  The  question  of  foreign  exchange  conditions  and 
tendencies  has  also  been  omitted  from  this  study;  both  these 
factors  affect  the  purchasing  power  of  the  people  in  the  coun- 
tries of  South  America,  but  they  are  not  within  the  scope  which 
can  be  covered  here. 


Conditions  in  South  America  as  a  Whole 

The  continent  of  South  America  presents  certain  general 
features  of  topography  and  climate  which  affect  materially 
the  purchasing  power  of  the  various  nations  on  it.  Extending 
from  about  9  degrees  North  latitude  to  55  degrees  South  lati- 
tude, the  continent  contains  some  7,279,200  square  miles,  of 
which  5,592,000  square  miles,  or  77%,  lie  within  the  tropics. 
The  consistently  outstanding  physical  feature  is  the  Andean 
mountain  range,  following  closely  the  western  edge  of  South 
America  throughout  its  entire  length  and  dividing  sharply  the 
large  countries  of  the  eastern  section  from  the  narrower,  coastal 
countries  of  the  Pacific  section. 

The  population,  variously  estimated  at  between  50,000,000 
and  60,000,000  people,  is  composed  of  pure  whites,  compara- 
tively few  in  number,  Indians,  Negroes,  and  a  small  number 
of  Asiatics,  while  a  large  proportion  are  mixtures  of  white  and 
Indian,  white  and  negro,  or  a  mixture  of  the  three.  The  mix- 
ture of  white  and  Indian  blood  has  resulted  in  the  mestizo 
class,  which  with  the  w^hites  contains  all  the  population  gen- 
erally able  to  purchase  foreign  goods.* 

The  people  on  the  whole  tend  to  concentrate  largely  along 
the  coastal  regions  of  the  eastern  countries  and  the  Andean 
plateau  regions  of  the  western  countries.  The  writer  has  esti- 
mated from  various  reports  that  1,622,500  people  live  in  cities 
of  10,000  to  25,000  inhabitants;  1.191,000  in  cities  of  from 
25,000  to  50,000;  1,225,000  in  cities  of  from  50,000  to  100,000; 
2,902,000  in  cities  of  fi-om  100,000  to  500,000  and  2,575,000  in 
cities  of  over  500,000.  There  are  altogether  about  9,515,000 
people  living  in  cities  over  10,000  inhabitants  in  size,  amount- 
ing to  20%  of  the  total  population.** 

Transportation  facilities  follow  tiie  trend  of  |)()[)ulat  ion,  and 
the  railroads  in  general  ai"e  a  net-work  extending  from  the  chief 
port  centers  for  shoi't  distances  inland.     Exceptions  occur   in 

*Bryce,  Ohsrrvation  and  Impressions,  South  America, 
**Spec.  Agts.  Ser.  No.  81,  Dept.  Com. 


PLANNING  IN  EXPORT  TRADE  135 

the  case  of  Bolivia  and  of  cei'tain  sections  of  Argentina,  where 
there  are  markets  at  considerable  distances  from  the  coasts. 
On  the  north  and  east  coasts,  rivers  form  an  important  part  of 
the  transportation  sj'stem.  On  the  west  coast,  the  rivers  drop 
rapidly  from  the  plateau  to  the  Pacific  and  are  not  important 
as  means  of  communication. 

The  important  market  centers,  as  shown  by  the  concentration 
of  population,  are  in  most  cases  on  or  near  the  areas  adjacent 
to  ports.  The  difficulties  in  reaching  the  markets  are  chiefly 
those  of  ascending  the  plateau  regions,  except  in  Argentina. 
The  vast  interior  sections  of  the  continent  are  sparsely  inhab- 
ited, and  in  much  of  the  tropical  area  are  almost  unexplored. 
These  iuterior  regions,  therefore,  are  not  important  for  the  sale 
of  photographic  materials. 

All  the  nations  of  South  Amei'ica  present  much  the  same 
type  of  economic  development.  The  chief  industries  are  those 
dependnig  upon  the  exploitation  of  natural  resources,  and  the 
purchasing  power  of  a  large  proportion  of  the  people  is  based 
upon  pastoral,  agricultural,  mining,  and  forestry  activities. 
Manufacturing,  except  in  a  few  instances  such  as  the  Sao  Paulo 
district  of  Brazil,  has  not  been  developed  to  any  appreciable 
extent.  It  is  in  no  way  comparable  to  the  great  manufacturing 
industries  which  have  grown  up  in  Europe  and  the  United 
States.  The  need  for  manufactured  articles  of  all  kinds  has 
consequently  been  keen  in  Soutli  America.  Since  there  are  no 
districts  in  the  entire  continent  in  which  any  important  depos- 
its of  iron  ore  and  coking  coal  have  been  found  together  or 
within  transportation  distances  of  each  other,  it  may  be 
assumed  that  the  demand  for  basic  and  other  manufactures 
must  continue  to  be  supplied  by  the  great  industrial  nations 
of  the  world,  as  at  present. 

In  the  development  of  ncAV  countries,  the  nations  which  fur- 
nish the  necessary  capital  are  the  ones  with  which  a  large  part 
of  the  trade  of  the  developing  countries  is  done.  Especially  do 
the  borrowing  nations  tend  to  purchase  from  their  creditors 
those  goods  of  which  they  have  need.  In  the  }iast  it  has  been 
very  largeh'  the  commei-cial  countries  of  Europe  which  have 
lent  the  capital  used  in  the  development  of  South  America. 
As  a  natural  result,  England,  (Jei-many,  Franee,  and  to  a  less 
extent  other  European  nations  enjoyed  in  noruial  times  a  very 
substantial  portion  of  the  South  Ameriean  trade.  ('()m])etition 
in  selling  such  articles  as  photographic  su|)plies  has  always 
been  confined  to  the  exporting  eounti'ies,  there  being  no  domes- 
tic production  in  South  America.  Imi)ort  duties  in  all  the 
republics  have  been  very  high,  making  for  excessive  internal 
prices  of  many  articles  including  piiotogi-aphic  supplies,     Nev- 


136    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ertheless,  exports  of  these  supplies  from  the  United  States  to 
all  South  American  countries  have  increased  from  $32,320  in 
1900  to  $907,950  in  1919.* 

The  predominating  position  of  Europe  in  the  total  trade  of 
South  America  before  the  war  was  due  not  only  to  the  large 
amounts  of  capital  it  had  invested  there,  but  also  to  the  needs 
of  each  continent  for  the  products  of  the  other  and  the  willing- 
ness of  Europeans  to  study  and  satisfy  the  market  conditions 
peculiar  to  each  country.  Shipping  facilities  w^ere  excellent 
between  Europe  and  the  ports  of  South  America.  All  these 
factors  resulted  in  the  distribution  of  South  American  trade 
which  is  shown  in  the  following  table  and  was  figured  from  the 
trade  statistics  of  the  different  countries,  by  the  Pan  American 
Union. 


Distribution  of  South  American  Trade 

1910-1913  1914-1918  1919 

Imports  from :  (average  %)      (average  %)  (%) 

United  States    15.31 39.03 41.92 

United  Kingdom  .  .  .  .28.90 22.40 20.15 

Germanv    18.41 0 0.30 

France  \ 8.78 4.75 3.53 

Exports  to : 

United  States    19.91 35.95 34.40 

United  Kingdom  ....  24.27 24.76 23.45 

Germanv    13.70 0 0.20 

France    9.51 9.93 13.53 


These  figures  show  tliat  before  the  war,  the  United  Kingdom 
and  Germany  both  exceeded  the  United  States  as  exporters  to 
South  America  and  that  the  United  States  was  second  to  Great 
Britain  as  a  market  for  South  American  products.  During 
the  war  and  in  U)19,  the  Tnited  States  was  clearly  the  most 
imi)()rtaiit  nation  to  Soutli  Amcriea,  supplying  40%  of  the 
impoiis  to  tliat  eontineni   ;ind  laking  35'/,  of  its  exports. 

It  is  certain,  however,  lluit  ;is  soon  as  readjustment  has  even 
partially  taken  place  aljrond,  Europe  will  make  every  effort  to 
regain  its  former  jjosition  in  tlic  trade  of  South  America  and 
competition  in  all  lines,  inclnding  photographic  apparatus  and 
supplies,  must  be  met  by  American  concerns  doing  business 
with  the  Soutli  American  conntries. 

*Com.  and  Nav.  Reports,  U.  S.  Dept.  Com. 


PLANNING  IN  EXPORT  TRADE  137 

The  general  importance  of  South  America  to  the  United 
States,  both  as  a  market  for  exports  and  source  of  imports,  is 
not  to  be  denied.  The  United  States  regularly  draws  from 
10%  to  15%  of  its  total  imports  from  South  America  and  sends 
to  it  about  3%  to  6%  of  its  total  exports.  Exports  of  photo- 
graphic supplies  after  1908  were  about  2%  to  4%  of  the  total 
exports  of  those  supplies.  The  ratio  from  1903  to  1908  was 
abnormal  and  was  caused  by  a  falling-off  of  exports  to  other 
continents  rather  than  by  an  unusual  increase  of  South  Amer- 
ican sales.  Since  1908  there  has  been  a  steady  growth  in  the 
exports  of  photographic  materials  to  South  America,  both  in 
absolute  amount  and  in  percentage  of  total  photographic 
exports. 

Argentina 

Argentina  is  the  most  important  of  the  vSouth  American 
nations  in  the  trade  of  the  world,  both  in  absolute  and  in  per 
capita  exports  and  imports.  Its  area  of  1,153,000  square  miles 
lies  almost  entirely  in  the  south  temperate  zone.  Its  population 
of  over  8,200,000  people,  though  less  than  one-third  that  of 
Brazil,  is  greater  than  that  of  any  other  South  American  coun- 
try and  is  composed  almost  entirely  of  whites  of  European 
extraction.'  The  Census  of  1914  showed  that  there  are  over 
5,500,000  native  Argentines,  over  2,350,000  foreigners,  and  only 
68,000  Indians,  of  whom  50,000  were  termed  "civilized."  Of 
the  foreigners,  Italians  and  Spaniards  predominated,  there 
being  929,000  of  the  former  and  829,000  of  the  latter. 

The  population  is  largely  centered  in  the  region  surrounding 
Buenos  Aires,  in  a  radius  of  400  miles  from  which  80%  of  the 
entire  nation  is  estimated  to  live.  This  city,  the  largest  in 
South  America,  ])ractieally  dominates  the  entire  import  trade 
of  the  country  and  through  it  pass  perhaps  80%  of  the  total 
exports.'  From  it  radiate  22,141  miles  of  railroads,  making  it 
the  greatest  railroad  center  in  South  America. 

The  purchasing  power  of  the  people  is  based  almost  entirely 
upon  grazing,  agricultural,  and  similar  activities.  Despite  the 
relatively  small  population,  these  pursuits  are  sufficiently  lucra- 
tive to  put  Ai-gcntina  easily  in  first  place  in  South  America  in 
ability  to  pui-ehase  foreign  products. 

In  the  yeai-  1911-12  tbe  total  national  production  of  Argen- 
tina was "  estimated  at  $1,038,849,000,  of  which  $965,118,000 
(over  90';^)  i-esulted  from  live  stock,  grain,  poultry,  and  allied 
products."     There   is    no   coal   and   no   supply   of   water  power 

^Economic  Development  of  the  Aiji'.  Kep..  E.  Tornquist  Co.,   '19. 
*Spec.  Agt.  Ser.  No.  190,  p.  11. 
'Spec.  Agt.  Ser.  No.  81,  p.  87. 


138    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

near  the  population  centers  on  which  to  base  manufacturing 
industries,  and  it  is  likely  that  the  purchasing  power  of  the 
people  will  continue  to  be  derived  from  the  above  sources.  The 
great  value  of  these  products  is  shown  by  the  fact  that  Argen- 
tina has  been  estimated  to  be  the  wealthiest  country  per  capita 
in  the  world. ^ 

In  1913  and  1919  this  nation  purchased  from  the  United 
States  more  goods  than  did  any  other  South  American  coun- 
try, though  Brazil  w^as  first  in  supplving  imports  to  the  United 
States.  In"  1913  Argentina  took  $52,894,834  (2.14%)  of  the 
United  States  exports,  and  in  1919  took  $155,899,390  (1.97%). 
It  sent  to  this  country  in  1913  products  worth  $28,863,732,  and 
in  1919,  $199,158,401  (1.48%  and  5.17o  of  United  States  total 
imports). 

In  per  capita  Government  revenue,  averaged  over  a  four- 
year  period,  Argentina  was  third  among  the  South  American 
luitions  and  its  expenditures  exceeded  this  revenue.  It  was 
the  country  of  first  importance  in  amount  of  foreign  invest- 
ments, which  were  between  $4,000,000,000  and  $4,500,000,000 
at  the  outbreak  of  the  European  AVar.  Of  this  amount, 
$1,897,935,000  was  British,  $400,000,000  French,  $250,000,000 
German,  and  about  $100,000,000  United  States,  though  the  lat- 
ter figure  has  probably  inci'eased  coiisidei'ably  since  that  time.^ 

In  1913  Argentina'  took  $112,549  of  United  States  photo- 
graphic materials,  and  in  1919  took  $347,136,^  making  it  in 
this  respect  also  the  most  important  of  the  South  American 
countries.  The  determination  of  the  number  of  people  who 
might  pui'chase  these  supplies  is  based  upon  the  estimated  pop- 
ulation of  8,284,000.  To  define  the  age  group  of  both  sexes, 
between  15  and  50  years  old,  the  ratio  of  50%  is  used.  This 
was  the  ratio  in  the  United  States  in  1860,  as  given  by  the 
census  of  that  year,  and  the  development  of  Argentina  may  be 
taken  as  roughly  equivalent  to  that  of  the  United  States  at  that 
time.  The  age  group  is  thus  found  to  contain  4,142,000  per- 
sons. Illiteracy,  though  not  capable  of  exact  determination,  is 
considered  to  be  35%,  or  1,500,000  of  the  age  group.  This 
leaves  as  a  maximum  possible  mai'ket  in  Argentina,  for  the 
sale  of  photographic  materials,  about  2,642,000  persons  of 
both  sexes. 


His  I'esults  for  other  couuti'ies  are  suiniuarizcd  in  llie  follow- 
ing table : 

Mourn.  Itoyul  Statistical  Society,  London,  July  3919. 

^Spec.  Agt.  Ser.  No.  169. 

•'U.  S.  Conuucrcc  and  Navigation  Reports, 


PLAXXIXG  IX  EXPORT  TRADE  139 

South  American  Markets  for  U.  S.  Photographic  Materials 

1919 

( P>r;ickotoil    imiiioiiils   show    jiositioii    uiiilcr    ciicli    item) 

Imports 


Imports  l^ 

S. 

riissil.lc 

l\' 

r  Cap. 

Per 

Cap. 

Count 

rv 

riioto  Su])pl 

ies       C 

OIlSll  MUM'S 

Tot; 

Ill    Pop. 

Pos. 

Cons. 

Argen. 

a) 

$347,136 

(2) 

2,642,000 

(1) 

$0,043 

(2) 

$0.13 

Braz. 

(2) 

298,242 

(1) 

3,000,000 

(•■^) 

0.01 

(5) 

0.099 

ChOe 

(3) 

95,705 

(3) 

800,000 

(3) 

0.024 

(6) 

0.095 

Peru 

(4) 

53,452 

('^) 

225,000 

(4) 

0.011 

(1) 

0.237 

Urug. 

(5) 

51,782 

(4) 

420,000 

(2) 

0.037 

(3) 

0.12 

Colom. 

(6) 

25,143 

(6) 

225,000 

(7) 

0.004 

(4) 

0.111 

Venez. 

(7) 

25,047 

(8) 

125,000 

(8) 

0.002 

(8) 

0.053 

Ecdor. 

(8) 

6,683 

(9) 

75,000 

(6) 

0.004 

(7) 

0.089 

Boliv. 

(9) 

2,359 

(7) 

145,000 

(9) 

0.0004 

(9) 

0.012 

Total 

Consumption 

.1914 

U.  1 

3 $35,599,000 

48,000,000 

$0,356 

$0.' 

76 

Are  the  data  upon  which  conclusion  is  based  sufficient 
to  warrant  the  company's  adoption  of  his  recommenda- 
tions !  What  criticism  might  be  offered  upon  the  method 
of  approach? 


Problem  31 

Middle    Western    Association    of    Garment    Manufacturers — 

Analysis  of  the  Demand  in  South  American  Markets  for 

Women's  Ready-made  Garments 

Because  of  the  seasonal  nature  of  the  clothing  busi- 
ness, the  members  of  the  Middle  Western  Association  of 
Garment  Manufacturers  have  been  able  to  operate  their 
shops  but  from  thirty-tAVo  to  thirty-five  weeks  during  the 
year.  The  style  element  plays  so  important  a  part  in 
the  sale  of  women's  medium  priced  suits,  coats,  skirts, 
and  dresses,  that  retailers  refuse  to  place  their  orders  far 
in  advance  of  their  actual  needs.  During  the  rush 
periods  the  members  of  the  association  employ  many 
extra  workers;  when  the  slack  period  sets  in,  however, 
many  workers  must  find  employment  elsewhere,  the  effi- 
ciency of  the  organization  is  destroyed,  and  fixed  charges 
rapidly  reduce  profits.  Inasmuch  as  the  seasons  in 
Argentina  and  Chile  are  contrary  to  our  own,  and  in  the 


140    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

other  Latin-American  countries  llicrc  is  a  ])ossibility  of 
a  style  la*;'  as  compared  to  the  domestic  maiket,  the  asso- 
ciation is  making'  a  study  of  South  America  in  order  to 
determine  whether  or  not  it  can  allcxiate  its  seasonal 
diUficulties  by  selling  its  gan)K>iits  in  that  field. 

In  order  to  serve  as  an  outlet  for  the  garments  pro- 
duced by  the  members  of  this  association,  a  market  must 
have  the  following  qualifications: 

a.  There  must  be  a  group  of  women  who  correspond 
to  the  middle  class  of  women,  in  the  United  States. 

b.  There  must  be  a  demand  for  cloaks,  suits,  dresses 
and  skirts,  or  garments  of  a  similar  nature  of  the  quality 
in  demand  by  American  women. 

c.  This  demand  must  be  large  enough  to  warrant  the 
manufacturers  entering  the  market  and  the  returns  must 
be  large  enough  to  cover  the  cost  of  production. 

d.  It  nmst  be  possible  for  the  manufacturer  to  know 
the  style  demands  sufficiently  in  advance  of  the  seasons 
to  permit  the  garments  to  be  manufactured  during  the. 
slack  production  months  of  April,  May,  June,  or  October, 
November,  and  December. 

Argent'iHa 

According  to  the  national  census  of  1914  there  are 
3,568,214  women  in  Argentina,^  about  sixty  per  cent  of 
whom  live  in  the  cities  and  towns  within  a  radius  of  two 
hundred  miles  of  Buenos  Aires.  This  section  of  the 
country  has  a  temperate  climate,  and  is  served  by  a  good 
railroad  system.-  These  women  may  be  divided  into 
three  classes  corresponding  to  the  three  classes  in  the 
United  States,^     The  wealthy  gr-ou])  which  is  made  up 

'Pan-American  Union. 

''Special   Agent   Series,    No.    1(59. 

*Juan  Ovalle  Quintero,  economist  for  tlic  Aiiu'iic:in   Financial  C^onference. 

(1)  The  following  extract  from  a  letter  by  an  American  in  Argentina 
serves  to  throw  some  light  upon  the  characteristics  of  Argentina  as  a 
clothing  market. 

Cordoba,  Province  of  Cordoba, 
September  1,  1921. 
I   think   we   can    safely    count   the    number    of    women    in    Argentina   .as 
two   million    (2,000,000).      These   women    are    of   all    nationalities    of   the 


PLANNING  IN  EXPORT  TRADE  141 

largely  of  old  Spanish  families,  is  estimated  at  not  over 
five  hundred  thousand.  The  poor  group  is  composed  of 
two  million  Italians,  Spaniards,  Russians,  Syrians, 
Greeks,  and  other  immigrants  from  southern  Europe.  (1.) 
The  middle  group  which  consists  of  native  Argentines 
and  a  few  immigrants  from  northern  and  western 
Europe,  is  estimated  at  not  over  one  million. 

earth.  Three-fourths  of  tlic  total  population  are  native  Argentines — 
that  is,  a  mixture  of  Indian  and  Spanish  blood  with  also  a  touch  of  Negro 
blood;  one-eighth  arc  Italians;  onp-sixtoentli  arc  Spaniards; — or  perhaps 
I  had  best  indicate  the  numbers  by  percentage.  There  are  seventy-five 
per  cent  Argentines;  eleven  per  cent  Italians;  five  per  cent  Spaniards; 
three  per  cent  French;  one  per  cent  English;  one  per  cent  German;  four 
per  cent  of  other  nationalities.  Tlic  educational  standard  is  very  low, 
especially  among  the  .Argentines — perhaps  not  over  forty-five  per  cent  of 
the  children  of  school  age  are  in  school  and  at  least  that  per  cent  of  the 
Argentine  women,  especially,  that  can  not  read  or  write. 

Underskirts,  corset  covers,  combinations,  stockings,  shoes.  Few  hats 
are  used.  The  top  clothing  is  made  in  the  home  or  made  to  order  by 
dressmakers  in  the  stores  where  the  material  is  selected. 

To  be  frank  I  do  not  see  any  way  to  increase  importation  of  ready- 
made  clothes  unless  it  were  possil)le  to  make  them  less  expensive  or  some 
North  American  merchants  to  come  liere  and  put  up  a  manufacturing 
establishment  and  make  tlie  clotliing  according  to  tlie  latest  style  (for 
the  people  in  general  are  great  for  style  of  tlie  latest  fad)  and  then 
put  them  up  in  the  stores  in  the  most  attractive  way.  At  present,  on 
entering  the  stores,  tliere  aie  no  I'oady-made  dresses  in  sight.  As  to 
the  underclothing,  there  is,  for  a  Inrge  portion  of  this  class  is  bought 
because  of  the  cheapness,  but  the  dresses,  no.  On  all  sides  there  are 
real  pretty  materials  on  display  for  suits  and  dresses,  for  that  is  what 
is  sought. 

Why  do  they  not  purcliase  moi-e  readj'-made  clothing  now? 

1.  It  is  not  because  of  custom ;   it  is  because  of  economy. 

2.  It  is  because  they  cannot  get  it  (ready-made  clothing)  as  cheap. 

3.  It  is  not  because  the  ready-made  clothing  available  is  excellent, 
because  there  is  very  little  clothing  made  except  by  order  of  the  person 
wishing  the  clothing,  because  it  is  difficult  to  sell  it  otherwise. 

4.  It  is  because  the  ready-made  clothing  available  is  too  expensive  and 
does  not  fit   so  well. 

5.  It  is  because  the  ready-made  clothing  is  not  put  up  in  an  attrac- 
tive manner ;  no,  the  stores  are  not  untidy ;  no,  I  can  truthfully  say 
that  the  clothing  is  not  put  up  to  them  as  attractively  as  it  is  to  the 
women   of  the   United   States. 

Perhaps  it  would  be  possible  to  educate  them  to  buying  ready-made 
suits  and  dresses,  provided  they  were   not  too  expensive. 

Medium.  There  is  a  very  small  percentage,  I  should  say  not  more 
than  one-tenth,  of  the  women  who  recjuire  garments  of  good  and  conserva- 
tive style  and  good  wearing  quality.  The  reason  of  tliis  is  that  the 
women  care  so  much  for  the  style  of  the  latest  sort,  fad  or  what  not. 
Of  course  in  this  fact  would  lie  an  opportunity  for  merchants  from  other 
countries  to  begin  a  process  of  educating  them  so  that  they  would  care 
for  better  materials  and  more  conservative  styles.  As  it  is  now,  there  is 
a  large  percentage  that  seek  the  cheapest  and  an  inferior  quality. 


142    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Very  few  of  the  coats,  suits,  dresses  and  skirts  worn 
by  the  women  of  all  three  classes  are  made  in  wholesale 
manufactni'ing  establishments.  One  of  the  largest  estab- 
lishments in  the  country,  which  is  operated  by  Harrod's 
Department  Store,  requires  only  two  Iinndred  workers 
and  seventy  machines.^ 

Although  the  woukmi  follow  Parisian  fashions  closely, 
wearing  styles  only  six  months  after  their  appearance  in 
Paris,-  but  few  ready-made  garments  are  imported, 
most  of  the  women  having  their  clothes  made  to  order. 
During  1916  only  $172,198  of  ready-made  garments  were 
brought  into  the  country,  most  of  these  coming  directly 
from  Paris  for  the  use  of  the  wealthy  class.*''  An 
average  import  duty  of  forty  per  cent  ad  valorem,  plus 
a  seven  per  cent  surtax,  must  ])e  paid  on  these  garments. 

Chile 

It  is  estimated  that  there  are  now  about  1,875,000 
women  in  Chile,*  of  whom  forty-five  per  cent  live  in 
the  central  part  of  the  country  which  has  a  temperate 
climate,  and  can  be  reached  from  Valparaiso  by  train. 
A  large  portion  of  these  women  are  of  pure  Spanish 
stock,  most  of  the  mixed  races  being  found  in  the  south- 
ern and  northern  parts  of  the  country.  As  in  Argentina 
there  are  three  classes  of  women.  It  is  reported  that 
there  are  187,000  to  375,000  belonging  to  the  wealthy 

I  should  say  that  the  women  of  this  country  recognize  only  two 
seasons,  summer  and  winter  and  of  course  these  seasons  are  opposite 
to  ours  at  home.  However,  there  is  quite  a  tendency  on  the  part  of  the 
merchants  to  put  on  great  sales  at  the  close  of  the  Avinter,  for  example, 
and  the  people  seem  to  buy  some  for  the  following  winter.  Naturally 
this  buying  is  on  the  part  of  the  medium  classes.  Bear  in  mind  tliat  a 
large  amount  of  clothing  is  not  required  and  they  buy  only  the  actual 
necessities. 

Ready-made  and  medium  quality  garments  are  not  as  expensive  in 
Argentina  as  in  the  United  States.  A  suit  of  medium  (juality  materiiil 
costs  only  around  $30.  Of  the  best  material  between  forty-five  and 
fifty  dollars. 

My  opinion  is  tliat  the  greater  part  of  tlie  reaily-inade  goods  comes 
from  England,  some  from  France.  From  North  Aincrica,  not  enough  to 
mention. 

'Miscellaneous  Series  No.  68. 

sPersonal   inquiry   and   correspondence   of    investigator. 

^Miscellaneous  Series  No.  6S. 

^Special  Agent  Series,  No.  164, 


PLANNING  IN  EXPORT  TRADE  143 

group ;   about   900,000   to   the  middle   group ;   and   from 
500,000  to  750,000  to  the  poor  group.^ 

There  are  no  factories  in  Chile  which  produce  outer 
garments  upon  a  wholesale  plan  for  the  trade.-  Some 
garments  are  made  ''to  order"  in  establishments  oper- 
ated in  connection  with  the  largest  stores,  but  for  the 
most  part  they  are  made  in  the  homes.  (2.)  As  in 
Argentina,  the  women  often  wear  Parisian  styles  six 
months  after  their  creation  in  Paris.  The  following 
tigures  sliow  the  impoi'tations  for  tliree  years:-'* 

19i;]  1914  1915 

Cotton  Garments 172,196  81,439  35,295 

Silk  Garments    222,297  150,712  63,169 

AVool  Garments   :524,04S  208,493  62,026 

It  appears  that  one  reason  iniiK)rtation  has  been  so 
low  is  because  few  medium  j^riced  garments  have  been 
offered  for  sale  even  in  the  capital  of  Santiago.  The 
women  are  not  prejudiced  against  the  foreign  product, 
and  the  tariff  being  specific  (ten  pesos  per  kilo)  is  not 
at  all  jjrohibitive. 

'From  opinions  of  members  of  the  service  department  of  a  hank  spe- 
cializing in  Argentine  trade. 

'■"Speeial   Agent   Series,   No.   168. 

"8])ecia]   Agent   Series,   Xo.   1 68. 

(2)  The  following  extract  from  a  letter  hv  an  American  missionary  in 
(.^liile,  describes  the  buying  habits  in  Chile. 

Santiago,  Chile. 
Sept.  2S,  1921. 

As  to  the  percentage  wImi  Iniy  their  ciotJiing  ready  made  I  have 
arrived  in  my  investigation  at  the  conclusion  that  the  serving  class  buy 
practically  none,  the  middle  class  more,  perhaps  50%  of  it,  and  the 
wealthy  class  practically  all  of  it.  The  first  class  is  composed  of  about 
90%  of  the  women,  the  middle  and  moderately  well-to-do  about  10%. 
There  are  no  millionaires,  1  am  told. 

The  articles  of  ready-made  clothing  ])urchased  are  in  general  (of 
course  shoes,  hose  and  hats)  suits,  dresses  and  blouses,  coats,  sweaters 
and  rain  coats.  Remember  it  is  just  the  wealthy  class  that  buy  all 
of  these  articles  ready  made.  I  have  friends  among  the  middle  class 
who  make  all  of  these  things  for  themselves  except  shoes,  hose  and  rain 
coats.  This  is  true;  and  they  say  the  •majority  of  their  friends  do  this; 
and  I  know  the  serving  class  make  their  own  clothes — those  which  aren't 
given  to  them  by  their  mistresses  from  their  discarded  wardrobes. 

T  am  not  sure  about  the  women  being  educated  up  to  buying  their  clothing 
ready  made;  because  of  several  reasons.  First,  all  the  Avomen  I  know 
(I  have  no  friends  among  the  idle  rich — I  have  neither  the  time  nor 
the  inclination  for  them  even  if  I  had  the  opportunity)  are  proud  of  their 
ability  to  sew;  and  secondly,  they  are  taking  every  opportunity  to  learu. 


144    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Brazil 
The  market  for  ready-made  garments  in  Brazil  does 
not   extend   beyond    a   wide    strip   of   territory   running 
along  the  coast  from  Para  to  Rio  Grande  de  Snl.    Rail- 
road service  is  poor,  except  in  the  two  states  of  Rio  de 

The  Singer  Sewing  Machine  Agency  here  is  carrying  on  an  interesting 
propaganda ;  as  they  go  aV>out  advertising  their  machines,  they  conduct 
free  sewing  classes  and  demonstrations  of  tlie  use  of  the  machine.  They 
have  large  enrollments  in  these  classes  and  even  the  servants  often  own 
tlieir  own  ' '  Singers. ' '  The  girl  in  the  house  where  I  board  has  a  Singer 
Sewing  Machine,  a  thing  I  could  not  aspire  to  purchasing  to  bring  witb 
me.  However,  because  of  the  surprisingly  lower  price  at  which  they 
are  sold  here,  I  am  hoping  to  enter  the  class  of  owners  and  sewers;  for 
I  like  to  seAV  as  a  diversion  from  mental  tasks,  and  to  economize  with  a 
missionary's  pocket  book.  Thirdly,  (referring  back  to  the  previous 
numeration  of  reasons)  the  women  of  Chile  buy  few  ready-made  clothes 
for  economic  reasons.  The  imported  material  is  much  less  expensive 
even  after  paying  a  local  dressmaker  than  the  ready-made  article,  and 
the  native  made  material  is  very  much  cheaper. 

The  women  have  not  gone  in  great  numbers  from  the  homes  into  the 
professions  and  industries ;  they  have  one  or  more  servants  in  even  the 
moderately  well-to-do  middle  class  families;  the  women  have  time  to  do 
sewing  and  fancy  work  in  their  homes.  Chile  does  not  have  a  well 
deiined  class  of  ' '  business  girls ' '  as  we  have  in  the  states.  One  sees  a  real 
tailored  business  suit  so  seldom  on  the  street  that  he  turns  to  look  again 
at  the  pleasant  spectacle.  They  have  the  fancy  made  suit  or  dress  of  "la 
ultimo  mode"  (the  latest  style  or  fad).  Even  the  middle  class  girl  must 
be  in  the  latest  style;  hence  she  ])urchases  a  meter  or  two  extra  of  the 
material  of  each  suit  or  dress  in  order  to  be  able  to  change  her  dress  with 
the  quickly  changing  fashions.  Colors  also  change,  hence  the  Chilean 
girl  dyes  or  has  dyed  her  old  dress  and  with  tlie  made  over  model  she  has 
a  dress  of  the  very  latest  style  both  as  to  model  and  color.  This  infor- 
mation came  directly  from  Chilean  girls  Avho  do  this.  (Middle  class 
again.)     These  girls  are  school  teachers. 

As  to  ready-made  clothing  in  the  best  stores,  Gath  and  Chaves,  Casa 
Francesa,  Burgalot,  Struthers  and  a  few  others,  display  their  ready-made 
goods  well;  but  all  tlie  other  stores  have  crowded  unattractive  windows, 
where  even  a  beautiful  garment  would  not  seem  so  in  the  surroundings.  In 
most  of  the  smaller  shops  the  goods  and  the  few  ready-made  garments  there, 
blouses,  sweaters  or  shawls  are  hung  out  in  front  of  the  store  as  if  they 
had  just  completed  the  family  wash  and  had  hung  the  things  in  the  door 
or  even  out  on  the  street  against  the  walls  to  dry.  They  say  it  is  a  Span- 
ish custom.  In  none  of  these  stores  have  I  found  as  intelligent,  interested 
service  from  the  salesmen  as  we  have  in  the  U.  S.  They  do  not  know  their 
line  so  well  nor  do  they  enter  into  the  sale  with  the  })ersonal  interest  and 
intelligent  advice  that  we  get  from  our  best  salesmen. 

The  women  who  can  afford  it  here  buy  their  suits  by  seasons  as  in  the 
States  (of  course  our  seasons  come  in  the  reverse  order  here)  ;  but  one  sales- 
man told  me  that  many,  many  women  buy  suits  at  the  end  of  the  season 
because  they  are  cheaper;  then  they  save  them  until  the  next  season 
or  wear  them  right  then.  The  climate  is  very  even  in  all  ])arts  of  Chile 
especially  from  the  end  of  the  Northern  Desert  region  South  as  far  as 
Pta.  Arenas.  In  all  of  these  sections  tliere  are  not  very  cold  winters  nor 
very  hot  summers,  but  heavy  clothing  or  medium  weight  may  be  worn  all 
the  year  'round.  If  one  wears  voiles,  organdies  or  other  thin  materials, 
she  must  have  a  wrap  after  five  o'clock  in  the  afternoon  or  in  the  shade 


PLANNING  IN  EXPORT  TRADE  145 

Janeiro  and  Sao  Paulo. ^  As  in  Argentina  and  Chili  there 
are  three  classes  of  women.  It  has  been  estimated  that 
in  the  territory  under  discussion  there  are  250,000  in  the 
rich  group,  1,000,000  in  the  middle  group  and  8,500,000  in 
the  poor  group.-  The  upper  groups  are  composed 
largely  of  Portuguese,  Spanish  and  immigrants  from 
northern  and  western  Europe.  The  large  poor  class  is 
composed  principally  of  mulattoes,  Indians  and  mixed 
breeds."* 

No  great  proportion  of  women's  ready-made  outer  gar- 
ments are  made  in  wholesale  manufacturing  establish- 
ments within  the  country,  (;:!)  although  in  Kio  de  Janeiro 

'Special   Agent    Series,    No.    169. 

2A  eomposite  of  several  estimates  by  Soutli  American  experts. 

^4ugliinbaugli,   "Sellino-   Latin   Anu'rica." 

practically  all  the  time.  For  this  reason  tlie  materials  used  are  chiefly 
woolens,  heavy  linens  or  cotton,  or  mixed  wool  and  cotton  and  silk.  Very 
few  organdies,  voiles  and  similar  materials  are  nsed  in  comparison  with 
the  (States. 

The  most  prevalent  ready-made  clothing  is  from  France,  from  Paris. 
Some  houses,  chiefly  English,  import  English  ready-made  goods  but 
not  in  large  quantities,  and  the  wealthy  class,  a  salesman  told  me,  always 
ask  for  imported  ready-made  articles.  He  said  that  his  house  sells  some 
blouses  and  dresses  made  in  England;  but  the  biggest  liouses  in  Santiago 
import  their  stock  almost  entirely  from  Paris.  One  very  important  house 
is  called  ' '  Casa  Francesa  ' ' — ' '  The  French  House. ' '  If  their  ready-made 
things  are  not  all  imported  from  France  they  are  locally  made  from 
French  models.  I  am  told  by  the  salesmen  from  tlie  other  two  largest  houses 
selling  ready-made  goods  that  nothing  Avhatever  is  imported  in  this  line 
from  the  U.  S.  The  Gath  and  Chaves  man  (largest  house)  says  they  get 
absolutely  nothing  from  the  states.  The  other  English  house  said  that 
they  had  imported  hosiery  from  the  U.  S.,  but  since  the  bad  exchange, 
that  even  this  liad  been  discontinued.  I  think  we  can  safely  conclude 
then,  that  no  ready-made  clothing,  suits,  dresses  or  blouses  are  imported 
by  Chile  from  the  States.  There  are  some  shoe  stores  that  advertise 
American  shoes  and  perhaps  some  stores  still  get  silk  hose  or  other  acces- 
sories of  a  woman's  toilet;  but  there  is  no  ready-made  American  clothing 
for  women  here. 

(3)  The  following  letter  is  from  an  American  wlio  has  spent  a  number 
of  years  in  Brazil. 

55  Marquez  de  Abrantes, 
Eio  de  Janeiro,  Brazil, 
October  17,  1921. 
Even  as  to  poinilation  my  answer  can   not   be  entirely   satisfactory.     A 
census  has  been  taken  recently  but  the  returns  from  the  various  states  are 
not  yet  in.     The  old  figures  give  a  total  of  twenty-five  million  inhabitants, 
of  which  number  more  than  a  million  are  Indians.     The  last  census  shows 
Rio  to  have  one  million  six  hundred  eighty-four  thousand  people  but  the 


146    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

and  Sao  Paulo  several  factories  manufacture  a  cheap 
type  of  garment.  As  the  climate  ranges  from  53  degrees 
to  90  degrees,  coats  and  suits  are  in  little  demand.^ 
But  few  ready-made  garments  fire  imported  as  shown  by 
the  following  table  covering  both  men 's  and  women 's  gar- 
ments :- 

1913     1914     1915 

Cotton  Garments $1 ,105,570  $428,650  $423,050 

Linen  Garments 84,970  31,370  32,060 

Silk  Garments 36,190  21,720  40,320 

Wool   Garments.... 75,940  34,960  16,700 


Totals    $1,302,620       516,700      512,130 

The  importations  are  made  almost  entirely  by  the  very 
rich.  Upon  trimmed  garments  a  duty  of  sixty  per  cent 
ad  valorem  is  charged,  but  upon  untrimmed  garments  a 
charge  is  made  which  is  double  the  duty  on  the  tissue 

division  into  sexes  is  not  made.  Of  course  somewhat  more  than  half 
are  women.  The  country  has  about  three  hundred  thousand  German  women, 
about  five  hundred  thousand  Italian  women,  a  goodly  number  of  French 
women  and  only  comparatively  few  Americans.  English  and  other 
Europeans  are  also  few  in  number. 

I  visited  all  the  best  stores  in  this  city  and  interviewed  the  heads 
of  departments.  None  of  them  could  give  me  any  idea  of  the  percentage 
of  women  who  buy  ready-made  garments.  All  of  them  said  that  dresses 
displayed  in  their  stores  are  made  in  the  very  same  shops.  One  said  that 
they  seldom  display  dresses  to  attract  the  customer,  that  they  seldom  sell 
them,  and  never  Avithout  much  alteration,  to  make  the  dress  express  the 
individuality  of  the  customer.  Another  said  that  they  sell  many  dresses 
made  in  the  shop  and  many  French  dressess,  but  that  a  few  years  ago  they 
tried  carrying  a  line  of  American  dresses  which  had  to  be  made  over  before 
selling,  as  the  styles  were  not  pleasijig.  In  any  store  one  may  select  ma- 
terial and  order  a  dress  made  according  to  individual  taste.  M.any  Brazilian 
women  do  this,  many  make  them  or  have  them  made  at  home,  and  the 
extremely  wealthy  ones  order  direct  from  Paris. 

The  men  with  whom  I  talked  told  me  that  the  Brazilian  woman  cannot  be 
induced  to  buy  ready-made  frocks.  In  each  instance  the  reason  given  was 
fear  of  finding  her  dress  duplicated  and  failure  to  exercise  her  own  taste. 
In  their  opinions  economic  reasons  had  aniall  place.  It  seems  that  Ameri- 
can styles  are  too  plain  to  meet  with  approval  here,  and  it  is  a  well-grounded 
custom  to  have  one 's  clothes  made  according  to  one 's  own  ideas.  One  sales- 
man told  me  that  men  insist  upon  having  their  suits  tailored  even  if  it 
empties  their  pocket-books.  Mr.  Schurz,  in  spite  of  these  opinions,  believes 
that  the  Brazilian  women  can  and  will  be  educated  up  to  the  use  of  ready- 
made  garments.  His  faith  comes  at  least  in  part  from  the  fact  that  five 
years  ago  a  man's  readj'-made  shirt  was  seldom  sold,  and  now  men  seldom 
do  the  old  way  of  selecting  the  material  and  ordering  the  shirts  made. 

'Miscellaneous  Series,  No.  71. 

'Miscellaneous  Series,  No.  71. 


PLANNING  IN  EXPORT  TRADE 


147 


from  which  the  product  is  made  plus  a  ten  per  cent  sur- 
tax Ihe  middle  class  have  some  of  their  garments  made 
stottt^rf '"■;;"  <'°'"f'=««"  ^"«>  «^'^  l^^ge  department 
.  hom,  T  ,"'■  "  "r''  Pf  *''^'  "'''^'  ^^'^'  g«™»t« 
clotlies^'  ''"°''     '""'  "   ''''"''"'•  '"^'''^  ""  °^  *'>^"'  "^"' 

In  the  two  states  of  Bio  de  Janeiro  and  Sao  Paulo  the 
i-arisian  fashions  often  appear  at  the  same  time  that  thev 

Tsite'^r™  ?/f''  '™"  "'""S-^  "'^  ^«««°"«  «re  op- 
posite.^     Since  the  temperature  does  not  vary  greatly 

during  the  year,  it  makes  little  ditference  whether  winter 

or  summer  fashions  are  worn.  Outside  of  these  two  states 

however,  because  of  the  scattered  character  of  the  popu 

lation  and  the  poor  transportation  facilities,  the  st4s 

are  often  one  or  two  seasons  behind  those  wo,;  in  Paris 

Colowbia 
Colombia  claims  a  populaticn  of  2,632,050  women  who 
-63,000  aie  of  Spamsh  desecnt ;  100,000  are  Indians  and 

b  ood.  1  0  mulattoes  and  mestizos  live  upon  a  low 
plane ;  for  the  most  part  they  dress  in  cheap  calico,  which 
enables  them  to  make  a  dress  for  forty  or  fifty  cents  ^ 

It  IS  reported  that  practically  all  of  the  whites  corre- 
spond to  the  middle  class  found  in  the  United  States'* 

'Bureau  of  Foreign  and  Domestic  Commerce. 
^Miscellaneous  Series   Xo.   71. 
'Miscellaneous  Series,  Xo.   7J. 

^;A„glu„b„„g,„      ..So,M„i;     L,„i„      A,.,.H ••      s,«.ial      A,e„t      Seric, 

"Special  Agent  Series  Xo.  20C. 

rej;St'S*Si:;S.'^P''"  '^^"^  '''-''  ''''  «P""-^  «f  --  American  long 

Barranquilla  Station, 
Apartado  100, 


Ii8    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Because  of  the  climate  which  ranges  from  hot  in  Barran- 
quilhi  to  a  spring-  coohiess  in  Bogota  there  is  Uttle  de- 
mand for  suits  or  cloaks.  No  garments  are  made  in 
wholesale  establishments  within  the  country,  and  im- 
portations are  few.  Most  of  the  clothes  are  made  in  the 
homes  or  ])y  dressmakers,  very  little  effort  having  been 
expended  to  increase  the  use  of  the  imported  garment. 
The  import  tariff  ranges  from  $1.60  to  $2.50  per  kilo. 
Although  in  Colombia  there  are  only  the  wet  and  the  dry 
seasons  the  garments  worn  are  based  upon  the  Parisian 
spring,  summer  and  autumn  styles,  but  because  of  in- 
adequate transportation  service,  the  styles  are  often  a 
season  or  two  behind  those  of  Paris. 

Problem   32 

The  Hight  Company — Districting  of  Sales  Territory 

The  Hight  (/ompany  is  the  third  largest  manufacturer 
of  tubes,  pipes  and  valves  in  the  United  States.  The  prod- 
uct is  used  by  many  classes;  consequently,  the  intensive 
cultivation  of  the  domestic  market  has  required  very  con- 
siderable study  not  only  in  finding  buyers  but  also  in 
determining  the  types  of  users  of  the  product.  The  first 
class  of  users  is  found  in  modern  buildings,  where  tubes, 
pipes  and  valves  are  required  for  plumbing  equipment, 
water  supply,  steam  or  hot  water  heating,  and  gas  and 

class ;  both  as  to  suits,  dresses  and  underwear.  Women  of  the  small  priv- 
ileged class  do  buy  the  expensive  suits  and  dresses;  as  to  lingerie,  a  small 
French  shop  with  very  beautiful  lingerie  sold  out  in  Barrnnquilla  a  few 
months  ago;  the  woman  in  charge  told  a  friend  of  mine  that  her  ])atrons  had 
been  largely  from  foreign  women  resident  in  the  city,  that  tlie  wealthy 
Colombian  women  were  not  willing  to  pay  the  price. 

This  question  brings  up  an  important  point.  There  are  no  seasons  in 
Colombia  that  correspond  to  our  own.  In  Bogota,  at  an  altitude  of  9,000 
feet,  per])etual  Spring  reigns,  and  the  altitude  makes  necessary  warm  Avraps. 
Men  wear  light  overcoats  and  women  cloth  suits  and  coats  all  the  year 
around.  In  Medellin,  at  a  lower  altitude,  tliere  is  less  cold  felt  but  also  an 
equable  climate;  tliere  are  two  seasons,  the  wet  and  the  dry,  but  these  do 
not  correspond  to  our  changes,  nor  do  tliey  make  perceptible  difference  in  the 
clothing  worn.  In  Barranquilla,  nearly  everybody  has  tunv,  gala  dresses  for 
the  Christmas  and  Ne\v'  Year  season,  and  I  think  the  custom  holds  through- 
out the  country.  The  carnival  season  from  ,lan.  20  to  Easter  is  a  gay  season 
and  rich  and  ])oor  buy  alike,  the  best  garb  their  purses  will  allow.  Carnival 
season  is  peculiar  to  BarraiKjuilla,  but  the  pre-lejitcn  season  is  marked  all 
through  the  country  by  gayety. 


PLANNING  IN  EXPORT  TRADE  149 

even  electric  lighting.  Factories,  institutions  and  homes 
of  modern  type  furnish  demand  for  these  articles.  A  sec- 
ond class  of  users  is  to  be  found  in  the  public  utilities  in- 
cluding municipal  water  works,  sewerage  systems,  gas 
light,  electric  power  and  telephone  systems.  Likewise, 
railroads  furnish  a  considerable  market,  since  locomo- 
tives require  much  tubing  and  many  valves,  and  in  the 
repair  shops  a  large  quantity  of  the  product  is  used  in 
addition  to  regular  operating  requirements.  Factories 
require  piping  for  steam,  water,  compressed  air,  and  for 
other  purposes.  Even  in  agriculture,  irrigation  furnishes 
demand  in  some  sections  for  a  very  considerable  amount 
of  the  Hight  CompanN^'s  product. 

In  the  domestic  market  the  company  sells  through  its 
own  branches  in  a  few  cities  and  through  various  types 
of  supply  jobbers  in  others.  In  the  foreign  field  up  to 
the  present  it  has  sold  through  commission  houses  and 
export  merchants.  Orders  which  have  been  received  have 
been  intended  mainly  for  the  Far  East  and  Argentina. 
The  goods  shipped  have  been  unbranded,  except  in  a  few 
cases  where  private  brand  marks  have  been  supplied.  As 
a  consequence,  the  Hight  Company  is  not  known  in  for- 
eign countries  even  where  its  goods  have  been  used  and 
have  given  satisfaction. 

It  has  recently  been  decided  to  go  after  export  trade 
more  aggressivel3\  The  new  export  manager  realizes  the 
advantage  of  planning,  not  only  for  the  present  but  also 
for  a  number  of  years  ahead.  He  realizes  that  at  best  he 
cannot  hope  to  work  all  markets  of  the  world  in  the  first 
year  or  even  in  the  first  five  years.  Therefore,  in  plan- 
ning one  of  the  first  things  he  must  do  is  to  determine 
which  territories  shall  be  singled  out  for  early  develop- 
ment and  the  order  of  their  development.  This  will  re- 
quire a  division  of  the  world  into  sales  districts.  The 
simple  expedient  of  making  the  continents  the  major 
divisions  does  not  appear  to  be  satisfactory.  There  is 
greater  similarity  between  Mexico  and  South  America 
than  between  Mexico  and  Canada,  although  the  latter  two 
are  on  the  same  continent.  There  is  greater  difference 
between  East  and  "West  Europe  than  between  Eastern 


150    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Europe  and  Western  Asia.  As  is  stated  in  a  Government 
bulletin,*  from  a  commercial  standi)oint  this  continental 
division  does  not  mean  anything.  ' '  The  parts  of  the  same 
continent  are  often  much  farther  apart  commercially  then 
two  different  continents.  Trade  does  not  group  itself  as 
to  continents,  but  as  to  man}'  facts  unconnected  with  con- 
tinents. Transportation  routes,  the  character  and  extent 
of  population,  the  kind  of  govermnent,  climatic  conditions, 
harbor  facilities,  etc.,  all  play  important  parts.  There- 
fore, the  continental  divisions  cannot  be  considered  sat- 
isfactory as  a  basis  for  a  study  of  the  markets  of  the 
world.  The  political  divisions  might  be  logical,  and  in 
fact,  most  of  our  geographies  take  up  the  commerce  and 
resources  of  one  country  after  another,  grouping  the 
smaller  countries  around  the  larger  ones.  This  is  not  an 
altogether  satisfactory  arrangement  for  purposes  of  for- 
eign-trade study,  because  of  the  fact  that  commercial  im- 
portance and  location  rather  than  size  are  of  greatest 
importance.  A  mere  listing  of  the  countries  for  the  pur- 
pose of  studying  their  commerce  will  give  far  from  sat- 
isfactory results. ' ' 

Likewise,  the  Bureau  of  Foreign  and  Domestic  Com- 
merce into  five  major  groups — Latin  America,  Far  East, 
West  Euro]je,  East  Europe,  and  Near  East — ^though  more 
satisfactory  than  the  continental  division  is  too  general 
to  be  of  material  aid  for  his  purposes  of  planning.  Two 
suggestions  have  been  made  for  division  into  sales  dis- 
tricts. One  is  that  he  adoi)t  the  Shipping  Board  division, 
which  divides  the  world  into  ten  major  areas,  these  in 
turn  being  subdivided  into  forty-one  trade  regions.  The 
outline  map  on  page  151  shows  roughly  the  grouping  of 
li-ade  regions.**  The  second  suggestion  is  one  adapted 
from  a  classiHcalioii  snggcstc^l  l\v  Vose  in  The   World's^ 

*Mi.sc-ell;iiieoiis  >Series  No.  !t7,  Tiyiiniiia  fur  F<if<l(in  l'r<i(l< .  Bureau  of  For- 
eign &  Domestic  Coinnicrcc. 

**Key  to  tliis  map  given  in  Training  for  Forcicfn  Trade  is  us  follows:  (the 
asterisk  indicates  tliat  a  study  outline  has  been  prepared  for  the  region.) 

].    .\tlantic  North  American  division: 
•  lA.  Canadian  Atlantic  region. 

IB.  United   States  Atlantic   region. 
IC.  United  States  Gulf  region. 


PLANNING  IN  EXPORT  TRADE 


151 


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to 


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« 
a 

B 
o 
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o 


152    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Markets,  the  second  unit  of  a  course  in  foreign  trade 
published  by  the  Business  Training  Corporation: 

T.     Northwester }i  Europe,  coinprisinp-  the  United  King- 
dom, the  Low  Countries  and  Switzerland. 

2.  Pacific  North  American  division : 

2A.  Alaskan  region. 

2B.  Canadian  Pacific  region. 

2C.  United  States  Pacific  region. 

3.  Middle  American  division: 

*3A.  West  Indian  region. 
*3B.  Eastern  Caribbean  region. 
*3C.  Western  Caribbean  region. 
*3D.  Mexican  Gulf  region. 
*3E.  Mexican  Pacific  region. 

4.  South  American  division : 

*4A.  Amazon  region. 
*4B.  Brazilian  highland  region. 
*4C.  River  Plate  region. 
*4D.  Central  Cliilean  region. 
*4E.  North  Cliilean  region. 
*4r.  Peruvian  region. 

5.  North  European  division  : 

*5A.  Arctic  Russian  region. 

*.'iB.  Scandinavian  region. 

*5C.  Eastern  Baltic  region. 

5D.  German  region. 

.^E.  French  Atlantic  region. 

5F.  British  region. 

5G.  Netherlands  region. 

511.  Greenland  region. 

6.  Mediterranean  division : 

6A.  Spanish  region. 

6B.  Italian  region. 
*GC.  Black  Sea  region   (Russian  })orts  under  Russia). 
*6D.  Eastern  Mediterranean  region. 

6E.  North  African  region. 

7.  West  and  South  African  division : 

7A.  West  African  region. 
7B.  South  African  region. 

8.  Indian  Ocean  division : 

8A.  East  African  region. 
SB.  Arabian  region. 
8C.  British  Indian  region. 
*8D.  East  Indian  region. 

9.  East  Asian  division. 

*9A.  Ea.st  Asian  region  (except  Siberia). 
*9B.  Philippine  region. 

10.  Australian  division: 

OA.  West  Australian  icgidii. 
OB.  Main  Australian  region. 
OC.  Soutli  Pacific  region. 


PLANNING  IN  EXPORT  TRADE  153 

IT.  Northeastern  iJwropt,  couiprisiuj:,  Germany,  Austria- 
Hungaiy,  the  Scandinavian  Countries,  and  North- 
ern and  Central  Russia. 

III.  The  Mediterranean  Region,  cumprisinji:  France, 
Spain.  Portugal,  Italy,  Greece,  the  Balkan  States, 
European  and  Asiatic  Turkey.  Southern  Russia, 
Egypt  and  Northern  Africa. 

IV.  Asia,  comprising  China  and  ^lanchuria.  Japan, 
Chosen  (Korea).  Formosa,  India,  Ceylon,  Straits 
Settlements,  Malay  States,  the  Dutch  East  Indies, 
and  all  the  othei-  countries  on  the  Contineut  except 
Asiatic  Turkey. 

V.     Australasia,  comprising  Australia.  New  Zealand  and 

the  South  Pacific  Islands. 
VI.     Africa,  except  for  the  ^Mediterranean  countries. 
VII.     North    and    Central   America,   comprising    Canada, 

Newfoundland,  Mexico  and  Central  America. 
VIII.     The  Caribbean  Region,  comprising  Cuba,  Haiti,  the 
Dominican    Republic,    Bermuda    and    the    British, 
I^'reiich,  Dutch  and  Danish  West  Indies. 
IX.     South  Atne)-ica,  com])rising  all  the  counti-ies  of  the 
South  American  continent. 

Should  either  plan  be  adopted  in  its  entirety;  and  if 
not,  what  moditieations  should  be  made  to  lit  the  purposes 
of  the  Hight  Company  ? 

What  information  is  needed  to  make  a  preliminary 
plan  and  schedule  for  the  development  of  foreign  mar- 
kets containing  particularly  the  following  points : 

(1)  Suggested  methods  of  handling  particular  terri- 
tories, whether  by  mail,  salesmen,  agents,  or  branches. 

(2)  Date  for  entering  into  negotiations  with  agents  for 
initial  visits  of  salesmen,  wdth  dates  to  begin  preliminary 
work. 

(3)  Dates  for  opening  brandies.* 

*The  following  plan  taken  from  Export  Trade  and  Exporters'  Review 
may  give  some  suggestions  as  to  a  sales  plan  for  the  export  trade  of  a  com- 
pany manufacturing  toilet  articles  and  toilet  specialties:  (The  plan  covers 
a  ten-year  period  from  1919  and  lists  seven  export  salesmen  and  eight  mail 
territories,  with  varying  treatment  of  the  different  markets.  The  division 
is  made  upon  the  basis  of  sales  territories,  rather  than  continents  or  major 
geographical  divisions.) 

1.  L'nitkd  States.  Domestic  territory  except  see  Alaska,  I'orto  Rico,  Ha- 
waiian Islands  and  the  IMiilippines. 

2.  Canada.  1919-1924  domestic  salesmen  plus  city  salesmen  in  Toronto 
and  Montreal. 


loi    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  33 

PiTTSFiELD  Paper  Company — Establishing  Quotas 

Til  selling  writing,  bond,  book,  and  news  print  paper  in 
Fjatin  America  the  Pittsfield  Paper  Company  has  estab- 

3.  Newfoundland.  Cover  by  domestic  salesmen  with  Boston  head- 
quarters ;  ship  from  Boston  or  New  York  warehouses. 

4.  Bermuda.  Cover  and  ship  from  New  York  warehouses  by  New  York 
salesman. 

5.  Bahamas.  Cover  by  domestic  salesman,  whose  territory  includes  South 
Atlantic  States. 

6.  Alaska.  Cover  by  "Far  West  Salesman  3" — whose  territory  includes 
Washington. 

7.  The  Guianas.  Mail  Territory  No.  1 — for  ten  years  except  visits  by 
Gulf  salesman  from  Trinidad  to  Georgetown.  Exclusive  agencies  established 
by  mail  in  French  and  Dutch  Guiana  in  1920.  British  Guianas  held  open 
until  first  visit  of  salesman,  scheduled  as  possibility  in  1921  and  1922. 

8.  Gulf  Territory.  Cuba,  Porto  Eico,  Haiti,  Dominica,  all  islands  in 
Gulf  of  Mexico,  Venezuela,  Colombia,  Panama,  all  Central  America  and 
Mexico. 

9.  Mexico.  Border  towns  covered  by  domestic  salesmen  from  Texas,  Ari- 
zona, New  Mexico  and,  at  start.  West  (Joast  Mexico  from  Los  Angeles  by 
domestic  salesman  and  jobbers. 

10.  Southern  South  America.  Ecuador,  Bolivia,  Chile,  Argentina,  Para- 
guay, Uruguay,  Brazil — covered  by  Export  Salesman  No.  2.  1919-1924, 
annual  trips.  1925-1929,  permanent  headquarters  for  salesman  in  Argentina 
with   Avarehousing  facilities.     1924-1929,   Ecuador  added  to  Gulf  territory. 

11.  South  America.  Interior  cities,  such  as  Manatos,  form  mail  territory 
No.  2  for  direct  "all-by-mail"  selling,  with  or  without  exclusive  agency 
treatment. 

12.  British  Isles.  Export  Salesman  No.  3,  with  headtjUMrters  in  London. 
1919-1924,  indent  orders  only.  1925-1929,  warehousing  facilities.  1930— 
Branch  house? 

13.  European  Eussia.  Details  for  building  sales  plan  to  be  secured  in 
1920  and  filed  ready  for  adaptation  when  conditions  make  sales  campaign 
advisable. 

14.  NoRAVAY  and  Sweden,  Denmark.  Export  Salesman  No.  4.  1920, 
trip  to  include  appointment  of  local  sliort-time  agents.  No  national  agent 
to  be  appointed  until  complete  analysis  of  possibilities  based  on  actual  sales 
experience  is  completed.     1925-1929,  probably  one  agent  in  each  country. 

15.  Iceland.  Mail  Territory  No.  3.  Handle  direct  "all-by-mail"  from 
United  States,  not  from  Copenhagen,  because  of  known  wholesaler  who 
wishes  direct  factory  connection. 

16.  Holland,  Belgium,  France,  Spain,  Portugal,  Switzerland,  Italy, 
Morocco,  Tunis,  Algiers.  Export  Salesman  No.  5.  All  plans  to  be  based 
on  1920  tour  of  investigation.  Eough  plan  to  include  agents  in  each 
country,  plus  stock  of  certain  staples  in  Brussels. 

17.  Germany,  Austria.  Ultimately  to  become  territory  for  Export  Sales- 
man No.  G.  Warehouse  and  otlier  ])lans  postponed  until  conditions  clear 
and  production   increases  to   point   nocessit;iting  maximum   export  sales. 

18.  "New  Europe,"  Czechoslovakia,  Poland,  Balkans,  etc.  Mail  ter- 
ritory No.  4.  Export  manager  personally  to  keep  in  closest  touch  possible 
through  government  and  other  export  bureaus  and  export  organizations. 


PLANNING  IX  EXPORT  TRADE  155 

lished  branches  in  Havana,  Cuba,  Mexico  City,  Kio  de 
Janeiro,  Buenos  Aires,  and  Santiago,  Chile.  Usually  both 
the  managers  and  the  salesmen  are  natives,  since  they 
are  able  to  live  on  less  than  foreigners  and  can  be  secured 
at  a  lower  salary.  It  is  difficult  however  to  persuade 
these  salesmen  to  use  aggressive  selling  methods  and  se- 
cure their  share  of  the  business,  although  personal  in- 
struction has  been  given  from  time  to  time  by  the  firm's 
travellers.  In  order  to  hold  these  salesmen  to  a  given 
standard  the  Pittsfield  Paper  Comjiany  is  contemplating 
the  advisability  of  establishing  quotas  for  each  branch 
and  for  each  salesman.  ■ 

One  method  of  establishing  quotas  is  to  secure  reliable 
figures  on  the  total  amount  of  paper  business  done  in  each 
country  during  the  past  year,  compare  it  with  the  com- 
pany's sales  in  the  same  territory  for  the  same  period, 
make  an  estimate  as  to  the  amount  of  business  which 
should  be  secured  on  the  same  basis  during  the  current 
year,  add  a  percentage  to  cover  a  nominal  rate  of  increase 
plus  an  additional  amount  which  should  result  from  this 
year's  increased  advertising  appropriation,  and  finally 
adjust  the  resulting  figure  ac^'ording  to  the  position  in 

19.  European  Turkey,  Egypt,  Greece,  1919-1924.  Mail  Territory  No.  5, 
unless  eoiiditions  make  it  wise  to  include  in  territory  of  ' '  Around  the  World 
Salesman"  in  place  of  South  Africa,  q.  v. 

20.  Persia,  Afghanistan,  Palestine,  Mesopotamia.  Mail  Territory  No. 
6.     Agency  treatment  for  entire  ten  years. 

21.  Australasia,  Australia,  Tasmania,  New  Zealand.  1919-1922, 
Mail  Territory  No.  7,  1922-1924,  Export  Salesman  No.  6  on  "Round-the- 
World"  trip.     1925-1929,  Export  Salesman  No.  7,  resident  in  Sydney. 

22.  Haavaiian  Islands,  Philippines,  China,  Indo-China,  Straits 
Settlements,  New  Guiana,  Dutch  East  Indies,  Siam,  Burma,  India 
proper,  Ceylon,  1919-1924.  Export  Salesman  No.  7  on  "Round-the- 
World"  trip.  1925-1929,  Export  Salesman  No.  7,  aided  by  one  or  two 
junior  salesmen  working  in  the  interest  of  establislied  trade. 

23.  British  South  Africa,  1919-1922.  Export  Salesman  No.  7,  in 
"Round-the-Woild"  trip,  or  covered  by  mail  in  1919  and  1920  and  trip 
by  British  Isles  salesman  in  1920  to  establish  five-year  agency. 

24.  Africa.  Not  included  in  (16),  (19)  and  (23) — Mail  treatment,  in- 
eluding  five-year  agencies. 

25.  Asiatic  Russia,  1919-1922.  Mail  treatment  only.  1922,  accept  ar- 
rangement for  tliree  years  offered  by  San  Francisco  export  commission 
house  with  house  in  Vladivostok  192(5-1929,  sales  development  plans  based  on 
general  conditions  in  Russia  and  sales  volume  secured  through  San  Fran- 
cisco export  commission  house. 

26.  Isolated  markets,  such  as  the  Azores,  Canary  Islands,  Mada- 
gascar.    Mail  treatment  with  or  without  agencies. 


15G    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  business  cycle ;  i.  e.,  whether  forecasters  show  it  to  be 
a  poor  or  a  prosperous  year.  ;  The  Department  of  Com- 
merce is  issuing-  a  number  of  reports  on  the  amount  of 
business  being  done  in  foreign  countries  and  figures  are 
available  showing  the  total  exports  and  imports  of  coun- 
tries by  commodities.)  Commercial  agencies  have  com- 
piled lists  of  dealers  in  every  town  of  importance.  It 
should  be  comparatively  easy  not  only  to  establish  such 
a  quota  for  each  country,  but  for  each  branch  manager 
in  turn  to  list  the  dealers  in  his  salesmen's  districts,  es- 
timate the  total  amount  of  business  they  do,  and  give 
each  salesman  a  quota  that  would  be  his  just  portion  of 
the  total  quota  set  for  the  entire  country. 

/Although  this  quota  might  be  easily  established,  in 
many  instances  it  would  ])e  unfair.  Take  the  case  of 
Chile,  for  example,  where  British  and  German  paper 
firms  have  a  tremendous  advantage  because  many  Brit- 
ish and  German  subjects  have  established  shops  in  that 
country.';  Naturally  enough  they  buy  their  supplies  from 
the  export  houses  handling  goods  produced  in  their  own 
country.  It  is  reported  tliat  out  of  five  stationery  stores 
in  Valparaiso  four  are  owned,  operated,  and  financed  by 
Britishers  and  the  fifth  by  a  German.*  Few  Americans 
reside  permanently  abi-oad  and  fewer  still  open  shops  or 
stationery  stores.  It  is  evident  that  a  fair  quota  could 
not  be  based  on  exports  and  imports,  the  total  amount  of 
business  carried  on,  or  the  number  of  stationery  dealers 
in  each  city.^ 

TAnother  method  of  setting  a  quota  is  for  the  export 
manager  to  visit  each  country,  study  conditions,  and  dis- 
cuss the  situation  with  the  branch  manager  and  his  sales- 
men.    The  salesman  should  be  much  nioi-e  in  sympathy 

*S:ili'siiieii  rejioit  tli:it  tlioso  diflieiilties  <lo  not  exist  .-iloiu'  in  the  paper 
business,  but  are  coiitiniinlly  ('diit'ioiitinf;'  houses  selling  inacliinery  .'nul  other 
cfmimodities  ;is  well.  The  railroad  shoj>s,  fianidries,  and  macdiine  shops  of 
X'alparaiso  and  Santiago  and  the  navy  yard  at  Talcaliuno  are  all  manned  by 
British  master  niecdianics  who  naturally  favor  liritish  macdiinery.  The  nitrate 
fields  to  the  north  are  also  controlled  by  Britishers  and  Germans  who  are 
partial  to  equipment  made  in  their  own  countries.  In  the  sale  of  piece 
jjoods  there  are  six  ];\vge  British  import  and  export  houses  pushinfj  the  sale 
of  British  textiles  and  it  is  extremely  difficult  for  representatives  of  Ameri- 
can textile  houses  to  sell  to  larj^e  distributors.  In  all  these  commodities  the 
American  salesman  must  often  l)e  satisfied  with  the  left-overs  or  business 
that  is  secured  al)solutely  on  a  competitive  basis. 


PLANXIXG  IX  EXPORT  TRADE  157 

with  the  quota  idea  and  more  vrilliiig  to  attempt  to  achieve 
the  goal  set  for  him  if  he  has  had  a  part  in  determining 
what  quota  is  justified  in  his  district.  The  brancli  man- 
ager and  the  export  manager  should  sit  down  with  each 
salesman,  find  out  the  ctealers  to  whom  the  company  can 
expect  to.  sell  its  paper  and  also  those  who  would  refuse 
to  buy  under  any  conditions.  The  amount  and  kind  of 
paper  that  the  Pittsfield  Paper  Company  could  sell  to 
each  of  these  dealers  in  a  season  should  be  estimated  and 
the  total  amount  determined  that  could  be  sold  in  each 
to^vn  or  city.)  The  quota  for  each  district  could  then 
easilv  be  ascertained  bv  securing  the  total  of  the  esti- 
mates  for  each  town  in  the  district.  (In  a  similar  manner 
the  quota  for  the  braiich  could  be  established  by  adding 
together  the  quotas  set  for  each  sales  district^  These 
quotas  would  be  built  up  from  the  bottom  instead  of  being 
passed  down  from  the  top  as  was  the  case  in  the  previous 
plan. 

The  principal  objection  made  to  this  plan  is  that  it  en- 
tails a  considerable  amount  of  work  on  the  part  of  the 
export  manager  and  his  branch  managers  and  consumes 
a  large  amount  of  time  which  might  better  be.  spent  in 
handling  correspondence,  planning  advertising  and  sales 
campaigns,  or  assisting  in  making  actual  sales.  .  Again, 
since  the  estimate  is  colored  with  the  views  of  the  sales- 
man who  is  frequently  a  prejudiced  jiarty  too  closely  con- 
nected mth  his  territory  to  ^(ii  a  detached  viewpoint,  the 
quota  established  by  this  plan  has  been  objected  to  as  be- 
ing unscientific.  /In  fact  with  the  different  conditions 
facing  each  district  and  the  difficulty  of  making  accurate 
forecasts,  because  of  seasonal  variations  affecting  agri- 
cultural and  other  industries,  it  is  extremely  doubtful 
that  it  would  be  advisable  to  try  to  establish  quotas  on 
any  basis. *^ 

^Nothing  has  been  written  upon  the  use  of  quotas  in  planning  foreign 
selling  operations  or  the  use  of  quotas  in  control  of  export  salesmen.  While 
a  number  of  concerns  Inulget  foreign  sales,  few  have  gone  to  the  length  of 
assigning  definite  quotas  to  salesmen.  The  use  of  quotas  is  more  common 
in  the  domestic  than  in  the  foreign  market.  Tlie  principles  and  practices 
of  quota-making  are  discussed  by  Frederick,  Modern  Salcsmanagemcnt, 
Chapter  XI.  Cf.  also  Staubacli,  Territory  Valuation,  Bulletin  of  the  Taylor 
Society,  October  1921. 


158    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  34 

Red  Star  Shoe  Company — Planning  Sales  Districts,  the 
Routing  of  Salesmen,  and  a  Sales  Campaign 

Having  built  up  a  large  business  in  the  United  States 
and  Canada,  the  Red  Star  Shoe  Company  has  turned  its 
attention  to  the  development  of  Latin-American  trade. 
The  same  methods  of  selling  directly  to  retailers  will  be 
used  that  have  been  so  successful  in  making  the  Red  Star 
brand  one  of  the  most  popular  medium  price  shoes  in  the 
domestic  market.  Four  salesmen  mil  be  sent  into  this 
new  field  as  soon  as  the  plans  for  the  sales  campaign  are 
completed.  These  men  will  call  upon  the  retailers  in  the 
principal  cities  having  a  large  enough  white  population 
to  warrant  the  operation  of  an  up-to-date  shoe,  store, 
using  the  company's  main  office  as  their  headquarters, 
they  will  cover  their  territory  once  every  six  months. 
Although  the  general  foreign  trade  policy  of  the  company 
has  been  decided  upon,  the  following  questions  have 
arisen  in  planning  the  foreign  sales  campaign. 

How  should  the  Latin-American  field  be  divided  into 
sales  districts f  How  should  salesmen  be  routed?  Should 
a  salesman  write  personal  letters  to  each  dealer  in  ad- 
vance of  his  visit?  In  view  of  the  small  number  of  sales- 
men available,  should  any  territory  be  developed  directly 
by  mail  ? 

Should  trade-paper  advertising  be  used  or  should  all 
dealers  be  circularized  directly  from  the  home  office':' 
Should  the  company  assist  its  dealers  in  disposing  of 
their  stocks  by  general  consumer  advertising,  or  should 
it  grant  a  lower  price  on  the  shoes,  leaving  the  retailers 
to  handle  their  own  consumer  advertising! 

Because  of  the  reported  strength  of  import  houses  in 
Argentina,  an  exception  has  been  made  of  this  territory; 
arrangements  have  been  comjileted  with  a  wholesale  mer- 
chant in  Buenos  Aires  to  cover  that  city  and  all  territory 
south  of  a  line  drawn  from  Buenos  Aires  west  to  Men- 
doza;*  similar  arrangements  liave  been  made  with  a 
wholesaler  in  Rosario  to  cover  Mendoza  and  all  territory 

*See  footnote  oil  next  page. 


PLANNING  IN  EXPORT  TRADE  159 

to  the  north  of  this  line  including  Asuncion,  the  capital 
of  Paraguay,  which  is  reported  as  having  but  few  good 
business  houses.  In  order  to  save  both  time  and  expense, 
it  is  intended  to  cover  Bolivia  in  the  same  fashion.  A  good 
wholesaler  in  Lima  is  willing  to  undertake  the  distribu- 
tion of  Red  Star  shoes  in  Bolivia  providing  he  is  given 
the  agency  for  Peru ;  in  Valparaiso  a  wholesale  merchant, 
equally  capable,  is  willing  to  cover  Bolivia  providing  he 
can  have  exclusive  rights  in  Chile.  As  other  wholesale 
houses  are  either  inferior  or  carrying  a  competing  hne, 
the  choice  depends  upon  which  territory  the  company  can 
cover  to  the  best  advantage  with  its  own  salesmen. 

There  appears  to  be  but  little  uniformity  among  Ameri- 
can exporters  in  establishing  sales  districts  or  in  routing 
their  salesmen  in  Latin- America.  One  shoe  manufacturer 
divides  Mexico  into  eight  sales  districts,  selling  to  the  re- 
tailers through  native  salesmen  in  the  same  manner  as 
in  the  United  States.  Another  manufacturer  divides  the 
same  territory  into  three  districts;  one  salesman,  after 
covering  southern  California  and  Arizona,  works  south 
from  Nogales  through  Guaymas  and  Mazzattas,  to  Tepic; 
another  salesman  crosses  the  boundary  at  El  Paso,  travel- 
ing south  through  Chihuahua,  Torreon,  Leon,  Mexico 
City,  and  Puebla  to  Vera  Cruz ;  another  enters  the  coun- 
try at  El  Paso  and  works  southward  through  Alonterey 
to  Tampico  w^here  he  embarks  for  New  Orleans  in  order 
to  take  a  steamer  for  Panama  and  Central  America. 

In  the  West  Indies  one  salesman  may  devote  all  his 
time  to  Cuba,  while  a  second  visits  the  rest  of  the  islands 
and  Central  America.  In  another  instance  one  salesman 
covers  all  the  West  Indies  and  the  principal  cities  of 
Venezuela  and  Colombia;  occasionally  Colombian**  ter- 
ritory is  combined  with  Central  America. 

In  covering  South  America,  one  salesman  may  take  the 
north  coast,  another  the  east  coast,  and  a  third  the  west 
coast.     For  more  intensive  development  of  tlie  territory 

*In  granting  exclusive  ;i}jencies  :il)ro;i(l  i'oni[i;inies  liave  sometimes  made 
tlie  mistake  of  assigning  territory  to  eaeh  agent  within  a  ten  or  twenty 
mile  radius  of  his  city ;  consequently,  a  portion  of  the  territory  is  either 
left  unassigned,  or  else,  because  the  circles  overlap,  the  rights  of  several 
agents  conflict. 

**See  next  page  for  footnote. 


IdO    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

one  sales  district  may  include  Chile  and  Peru,  another 
Venezuela  and  Colombia,  a  third  northern  Brazil,  and  a 
fourth  the  states  of  Eio  de  Janeiro  and  Sao  Paulo.  Para- 
guay may  be  included  in  the  southern  Brazil  territory  or 
covered  from  Buenos  Aires  in  the  Argentine  sales  divi- 
sion ;  Asuncion  in  Uruguay  may  be  reached  by  salesmen 
from  either  Buenos  Aires,  Rosario,  or  Montevideo. 

In  sending  out  its  salesmen,  the  company  is  governed 
by  the  fact  that  Portuguese  is  spoken  in  Brazil,  although 
Spanish  is  the  principal  language  of  the  other  Latin- 
American  countries.  Since  the  important  cities  of  Bra- 
zil, such  as  Para,  Pernambuco,  Bahia,  Rio  de  Janeiro,  Sao 
Paulo,  and  Porto  Alegre,  are  either  on  or  near  the  coast, 
the  salesman  can  cover  this  district  by  vessel,  making- 
short  excursions  by  railroad  to  reach  the  inland  towns. 
The  same  condition  holds  true  on  the  west  coast  in  the 
case  of  Lima,  Arequipa,  Iquique,  Antofagasta,  Valpa- 
raiso, Santiago,  and  Concepcion.  Only  in  the  northern 
part  of  Argentina  is  to  be  found  a  net  work  of  railroads 
comparable  to  that  in  the  United  States.*** 

**Tlie  following  brief  description  of  the  three  possible  routes  iu  Colombia 
is  condensed  from  PrnrticaJ  Helps  for  Exporters,  published  by  Dun's  Inter- 
national Eeiaew. 

If  he  follows  the  first  route,  the  salesman  takes  a  steamer  at  Colon,  Pan- 
ama, for  Cartagena ;  thence  going  up  the  coast  to  Puerto  (\)lombia  he  takes 
a  train  for  Barrancjuilla.  I'assing  u,p  the  Magdalena  River,  he  stops  first  at 
Calamar,  and  later  at  I\Iom])os,  where  he  may  make  a  side  trip  by  mule 
back  to  Magangua,  Since,  and  Lorica ;  the  boat  stops  next  at  El  Banco,  a 
small  river  port,  and  Gamarra  where  the  salesman  again  makes  a  trip  by 
mule  back  to  Ocana  and  Bucaramanga.  Rejoining  the  river  boat  at  Puerto 
Wilches,  he  proceeds  to  Puerto  Berrio  in  oi'der  to  take  a  train  for  Medellin, 
the  second  city  of  Colombia,  where  mules  are  secured  for  the  trip  to  Sonson 
and  Manizales;  returning  to  Puerto  Berrio,  he  continues  the  trip  by  boat 
to  Girardot,  where  he  takes  the  train  for  Facatativa  and  Bogota.  Upon 
completion  of  his  business,  tlie  salesman  retraces  his  route  to  Barranquilla. 

The  second  route  begins  at  Buenaventura  on  the  P.acifie  Coast,  from 
whence  the  salesman  travels  by  train  to  Cali ;  continuing  to  Palmira,  he 
secures  mules  to  carry  him  to  Buga  where  he  takes  a  boat  for  Cartage; 
again  journeying  by  mule  back,  he  reaches  Manizales.  From  the  latter  city 
he  may  proceed  to  Bogota  as  previously  described  ;  he  may  continue  by  mule 
back  to  Iboque  and  thence  to  Bogota  ;  or  he  may  turn  soutliward  at  Girar- 
dot passing  by  muk'  back  tlirough  Noiv;i,  I'apayan,  I'asto,  to  Harbacoos 
where  a  river  boat  may  be  taken  to  Tunioid  on  the  Pacific  Coast. 

A  salesman  selecting  the  third  route  lands  at  the  Venezuelan  port  of 
Maracaibo;  crossing  Lake  ^Marai-ailto  ami  going  up  the  Zulia  Kiver  he  ar- 
rives at  Puerto  Villamizar,  Colombia,  where  he  takes  a  train  for  (^icuta, 
the  most  important  city  in  the  Jiortheastern  section  of  the  country.     Parap- 

***See  next  page  for  footnote. 


PLANNING  IX  EXPORT  TRADE  161 

lona  is  also  visited  from  wlience  tlie  salesman  may  either  return  to  Mara- 
caibo,  or  continue  by  mule  back  to  Bucaramanga,  covering  the  territory 
described  in  the  first  route. 

For  more  detailed  instructions  of  value  to  travelers  in  Latin  America, 
cf.  Filsinger,  CoriuncrcUd  Travelers'  Jlandhoo'k,  published  by  the  Depart- 
ment of  Commerce.  This  is  the  type  of  useful  publication  of  which  we 
shall  undoubtedly  liave  volumes  covering  other  areas  in  the  course  of  the 
next  few  years. 

***The  size  of  tlie  territory  Avhich  can  be  handled  by  one  salesman  will 
depend  upon  several  factors,  among  which  are  the  following: 

(;i)    Xumlx'r  and  cliaracter  of  customers  and  prospective  customers. 

It  is  evident  thnt  more  time  can  legitimately  be  spent  witli  ex- 
clusive agencies  than  if  all  dealers  in  the  town  are  to  be 
visited.  It  will  likewise  frequently  happen  that  more  time 
must  be  spent  with  a  wholesaler  than  with  a  retailer. 

(b)  Frequency  of  salesman's  visits  to  customers. 

It  is  evident  that  the  traveling  salesman  of  the  local  br;incli, 
wlio  calls  upon  liis  trade  once  a  month,  can  reach  a  much 
smaller  number  of  customers  than  the  salesman  who  visits  hia 
trade  only  once  in  every  three  or  four  months. 

(c)  Location  of  prospects  or  customers. 

A  salesman  can  reacli  more  customers  of  a  given  type  in  a 
metropolitan  area  than  in  a  rural  district.  In  densely  popu- 
lated areas  he  can  make  more  calls  than  in  sparsely  settled 
territory.  The  policy  of  the  company  with  respect  to  distri- 
bution affects  the  relative  location  of  customers  to  be  called 
upon.  AVith  exclusive  agencies,  each  call  will  frequently  mean 
to  tlie  salesman  a  trip  between  towns  or  even  between  coun- 
tries. The  customers  in  one  location  may  likewise  have  buy- 
ing liabits  which  require  snlosmen  to  proceed  more  slowly  than 
in  other  districts. 

(d)  The  character  of  the  ])roduct. 

If  the  demand  for  the  product  is  seasonal,  sales  will  be  made 
only  during  tlie  buying  seasons.  If  it  is  a  staple  product, 
standardized  and  well  known,  considerably  less  time  is  neces- 
sary for  the  salesman  to  handle  tlie  business  with  the  cus- 
tomer. On  tlie  other  hand,  if  the  product  is  a  new  specialty 
requiring  demonstration  or  one  of  a  technical  nature  requir- 
ing tests,  the  number  of  prospects  or  customers  reached  will 
be  decreased  according  to  the  difficulty  of  selling.  The 
prestige  and  reputation  of  the  selling  concern  will  also  mate- 
rially affect  the  time  necess;iry  to  make  a  sale,  also  the  amount 
of  preliminary  work  done  by  the  house. 

(e)  Transportation   facilities. 

Wlicre  transportation   facilities  are  adequate,   where  there  is 
frequent  train  or  steamship  serWce,  it  is  ob\-ious  that  the  sales- 
man can  cover  much  more  territory  or  handle  more  customers 
or  prospects  than  when  delay  caused  by  inadequate  transporta- 
tion service  is  f  recjueut. 
The  usual  references  upon  export  toi)ics  do  not  take  up  the  i)robleui  of 
planning  export  campaigns  as  a  wliole.     Consequently,  planning  to  ensure 
correlation  between  personal  salesmanship,  advertising,  and  other  means  of 
selling  has  been  definitely  followed  by  comparatively  few  export  managers, 
who  have  not  yet  put  their  exj)eriences  or  ideas  into  print.    References  upon 
constituent  elements  of  the  sales  campaign  will  be  found  under  the  various 
headings  and  in  the  bibliographies  in  this  volume. 


CHAPTER  IV 


EXPORT  POLICIES— POLICIES 
RELATING  TO  PRODUCT 

SOUND  development  of  export  trade  requires  the 
careful  selection  and  judicious  application  of  sound 
export  policies.  Anticipation  of  recurring  situa- 
tions is  essential  in  the  formulation  of  any  course  or  plan 
of  action  which  aims  at  the  upbuilding  of  a  profitable  for- 
eign business,  but  wisdom  in  the  selection  of  policies  is 
of  little  value  if  policies  are  frequently  changed  or  if 
good  judgment  is  not  used  in  their  application.  It  is 
sometimes  convenient  to  classify  business  policies  as 
policies  of  major  importance,  or  administrative  policies, 
and  policies  of  minor  importance,  or  detail  policies. 
Major  policies  include  the  broader  policies  of  a  business 
enterprise,  decision  upon  which  usually  has  a  direct  bear- 
ing upon  the  operation  of  the  entire  enterprise.  In  prac- 
tice all  such  policies  are  determined  not  by  the  functional 
executive,  such  as  the  export  manager  or  the  sales  man- 
ager, but  by  the  general  administrative  officers  of  the 
company.  Not  infrequently  they  become  the  concern  of 
the  board  of  directors.  Particularly  when  the  applica- 
tion of  policies  involves  large  expenditures  are  such  pol- 
icies decided  upon  by  the  higher  officials.  It  is  obvious 
that  the  decision  to  enter  the  export  market,  to  sell  in 
foreign  countries,  is  a  major  policy;  likewise,  frequently, 
the  general  policy  of  export  distribution — direct  or  in- 
direct selling.  Minor  or  detail  policies,  on  the  other 
hand,  include  those  policies  necessary  to  carry  out  busi- 
ness operations  in  accordance  Avitli  major  policies  laid 
down  by  administrative  authorities.  In  general  it  may 
be  said  that  this  is  the  field  of  policy  determined  by 

162 


PRODUCT  POLICY  163 

functional  executives.  It  is  e\ddent  that  in  the  case  of 
pohcies  concerning  many  phases  of  the  business  the  line 
cannot  be  clearly  drawn  between  major  and  detail  pol- 
icies, for  under  certain  conditions  and  with  certain  com- 
panies pohcies  which  are  of  subordinate  importance  may 
become  vital  to  the  existence  or  growth  of  the  business. 
Export  sales  pohcies  may  also  be  divided  according  to 
substance  into  several  groups: 

(1)  Policies  relating  more  particularly  to  the  product, 
such  as  the  shaping  of  the  product  for  the  export  market; 
detail  pohcies  as  to  styles,  models,  and  containers ;  like- 
wise, guarantees  as  to  service  or  quality  and  brand  and 
trade-mark  policies. 

_  (2)  Policies  relating  to  distribution—the  choice  of 
direct  or  indirect  methods  in  selhng  to  particular  markets 
and  operating  policies  under  whatever  general  methods 
may  be  selected. 

(3)  Policies  relating  to  prices  and  selling  terms. 

(4)  Policies  relating  to  financing,  credits  and  collec- 
tions in  export  trade. 

(5)  Policies  relating  to  claims  and  adjustments,  can- 
cellations, returned  goods,  etc. 

(6)  Policies   relating   to   advertising,  personal  sales- 
manship, and  management   of  sales   force~\w  general 
those  pohcies  relating  to  the  use  o/  the  means  of  selhni>-' 

(7)  Policies  relating  to  tha  delirerg  of  goods. 

It  is  also  evident  that  pohcies  mav  be  formulated  con- 
cerning organization;  in  short,  concerning  every  recur- 
rent phase  of  business  operations,  for  unless  a  particular 
set  of  circumstances  is  of  a  recurrent  nature  there  is  no 
need  ior  the  formulation  of  a  policv.  Bearing  in  mind 
always  that  decision  may  be  varied  by  the  different 
cii-cumstances  of  the  market,  the  fundamental  principles 
underlying  export  pohcy  are  the  fundamental  principles 
underlying  sales  policy  in  any  market.  Just  as  products 
must  be  shaped  and  packed  according  to  the  requirements 
ot  the  domestic  market,  so  must  thev  be  adapted  to  the 


16i    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

foreign  market.  When  for  a  long  time,  however,  goods 
have  been  manufactured  in  one  way  for  the  domestic 
market,  there  is  a  tendency  to  assume  that  that  is  the 
only  right  way  and  to  look  upon  any  demand  for  vari- 
ation as  inherently  unjustifiable.  In  manufacture  for  the 
domestic  market,  as  well  as  for  the  foreign  market, 
decision  to  vary  from  certain  established  manufacturing 
standards  is  the  result  of  balancing  production  and  sales 
values  and  sales  factors.  The  result  may  or  may  not  be 
in  favor  of  changing  from  standard. 

A.  Policies  Relating  to  Product  -. 

1.  Guarantees  of  product  as  to  quality,  durability,  and  ser- 
vice rendered. 

Shall  the  exporter  iiuarantee  the  products  lie  sells  as  to 
quality,  durability  or  service  reudtn-ed  ?  If  so,  should  this 
take  the  f  oi-m  of  a  writteu  f.''uarantee  ? 

Is  the  sales  advantage  from  an  unqualified  guarantee 
sufficient  to  offset  the  dangers  of  abuse? 

What  should  be  the  policy  of  the  manufacturer  with 
reference  to  goods  I'etui'ued  uiuler  an  indefinite  guar- 
antee ? 

2.  Selection   of   products  for   manufacture ;   full   line   versus 
specialties. 

What  policies  should  the  exporter  adopt  with  reference 
to  the  selection  of  products  for  manufacture? 

Is  it  advisable  for  a  manufacturer  to  add  products  in 
order  to  complete  his  line,  either  by  manufacturing  them 
himself  or  by  purchase  .'  Will  the  addition  of  such  prod- 
ucts tend  to  nullify  the  advantage  of  specialization? 

What  policy  should  the  exporter  adopt  with  reference  to 
changing  products  to  meet  demands  of  foreign  buyers? 

3.  I'olicies  as  to  change  of  style;  new  products. 

What  policy  should  a  manufacturer  adopt  as  to  change 
of  style?  Should  he  be  conservative,  attempt  to  keep  up 
to  the  minute,  or  produce  models  or  stvles  which  change 
little  ? 


PRODUCT  POLICY  165 

What  should  be  the  policy  of  the  company  toward  new 
products ;  toward  products  the  demand  for  which  is  a 
result  of  fad? 

1.  Policy  as  to  service;  repair  parts,  repair  service,  installa- 
tions. 

What  should  be  the  policy  of  the  exporter  with  rejrard 
to  service  in  connection  with  his  product,  where  it  hap- 
pens to  be  a  complicated  product .' 

Should  i('])aii-  service  ]iolicy  be  made  a  sellinj,;'  ])oint  .' 

What  ]:)olicy  sliould  Ije  adoi)ted  by  the  exporter  who  has 
no  branch  house  or  ay(^nt  in  the  foreip'n  territory  to  take 
charsie  of  the  installation  of  complex  machinery,  etc.? 

5.  Brand  policy;  private  brands  versus  manufacturei-s"  brands; 
"family"'  brands. 

What  should  be  the  policy  of  the  nuinufacturer  toward 
identitication  of  his  product .'  Should  he  establish  his 
own  brand  or  make  his  goods  under  brands  designated  by 
buyers — so-called  "pi-ivate  brands?"  What  should  be 
the  attitude  of  the  export  commission  house  toward 
private  brands'? 

What  difficulties  does  the  manufacturer  meet  in  trying 
to  establish  his  own  bi'and  in  foreign  trade? 


Problem  35 

Simplex  Razor  Company — ChaiNging  Product  to  Meet 
Foreign  Demand* 

Contrary  to  the  policy  followed  by  a  number  of  safety 
razor  manufacturers  the  Simplex  Razor  Company  not 
only  secures  a  profit  from  the  sale  of  extra  blades  but 
also  realizes  a  substantial  return  from  the  sale  of  the 
safety  razor  itself.    This  policy  was  adopted  because  the 

*Tliere  are  inimmcrable  brief  references  as  to  the  necessity  of  shaping 
the  product  to  the  demands  and  even  the  whims  of  the  foreign  buyer. 
Jii  most  cases  sucli  statements  are  uiuiualifitMl.  general  conclusions  being 
drawn  upon  the  basis  of  an  instance  or  two  in  which  trade  has  been  lost 
through    unwillingness   of   a   particular   manufacturer   to   comply   with   de- 


166    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

razor  lias  a  sliarpeiiiiig  ieatuie  wliieli  makes  it  possible 
to  use  each  blade  at  least  a  month  before  discarding,  and 
hence  destroys  the  possibility  of  a  large  profit  resulting 
from  the  sale  of  blades.  Because  the  firm  allows  quantity 
discounts  on  large  purchases  and  does  not  want  to  have 
the  big  retailer  make  it  unprofitable  for  his  smaller  com- 
petitor to  handle  Simplex  razors,  it  has  refused  to  sell 
to  any  retailer  who  fails  to  maintain  the  $5  to  $10  resale 
jjrice  on  its  different  models.  The  company  has  also 
found  it  desirable  to  maintain  a  comparatively  high  resale 
price  because  of  the  prestige,  high  quality,  and  air  of 
distinction  associated  in  the  minds  of  customers  with 
many  high-priced  articles. 

In  the  export  field  the  company  has  adopted  the  same 
price  policy  as  in  the  domestic  market,  but  because  of 
foreign  competition  it  has  been  forced  frequently  to  grant 
concessions.  In  England,  France,  Italy,  and  the  Scandi- 
navian countries  of  Europe  the  company  has  succeeded 
in  securing  widespread  distribution  and  there  is  a  grow- 
ing demand  for  Simplex  razors.  At  the  present  time  four 
branches  have  been  established  in  Europe  and  the  com- 
pany is  carrying  on  its  sales  campaign  through  advertis- 
ing and  personal  salesmanship  much  in  the  same  manner 
as  it  has  done  in  the  United  States,  modifying  its  domestic 
policy  only  in  so  far  as  has  been  necessary  to  meet  local 
conditions  abroad. 

In  Cuba,  Mexico,  and  South  America  conditions  are 
radically  different  from  those  in  Europe.  Each  Latin 
American  country  possesses,  it  is  true,  a  well-to-do  class, 
but  the  great  bulk  of  the  population  have  but  little  money. 
Although  the  Simplex  razor  has  been  introduced  in  prac- 
tically all  the  large  cities,  its  use  is  limited  almost  entirely 
to  the  upper  classes,  in  spite  of  the  fact  that  compara- 

mands.     Upon  the  general  subject,  cf.  Hough,  Practical  Exporting,  pages 
60-67;  Savay,  Principles  of  Foreign  Trade,  Chap.  XXXII;  Clerget,  Manuel 
d'Economie  Comcrciale,  Chap.  XVII;   also  the   following  articles: 
Printers'  Ink  Monthly. 

Dec.  1919,  p.  89— "A  British   Company   Tells  Its  War  Komance." 
Export  Trade  <f  Export(rs'  Review. 

Apr.  8,  1922,  p.  13 — "Adapting  American  Products  to  Foreign  Cus- 
toms. ' ' 
Journal  of  Commerce  and  Commercial  Bulletin. 

Jan.   7,   1920 — "  I'^'oreign   Trade   Needs  Standards." 


PRODUCT  POLICY 


167 


tively  few  South  Americans  wear  beards.  The  situation 
may  be  more  fully  appreciated  perhaps  after  a  study  of 
the  following  tables  of  population : 

Argentina  9,300,000  Chiefly    Mestizos     (descendants    of 

Area  (sq.  miles)    1,139,979  Spanish  native  intermixture)  ;  for- 
eigners,   about    2,300,000    of   which 
majority  are  Italians  and  Spanish. 
There  are  some  Indians. 
Bolivia  2,890,000  Mestizos,   550,000;  whites,   250  000- 

Area  (sq.  miles)  708,195  Indians,  1,750,000;  Wild  Forest  In- 
dians, 130,000;  balance,  miscella- 
neous.' 

Brazil  25,500,000  Whites,  13,260,000;  mixed   (whites, 

Area  (sq.  miles)    3,295,300   negroes,     etc.)     6,630,000;    negroes 

2,295,000;   Indians,  3,315,000. 

4,000,000  Whites,  1,000,000;  Mestizos,  2,800,- 
292,100  000;  Indians,  200,000. 

5,500,000  Whites,    550,000;    Mestizos,    2,750,- 
435,278  000;  Indians,  550,000;  negroes    l'- 
650,000. 

460,000  Almost  all  Avhites;   some  Mestizos; 
18,691  negroes,  about  26,000;  Indians,  5,- 
000. 

2,630,000   Whites,    1,841,000;    Mestizos,    447,- 
44,164  100;  negroes,  341,900. 

1,900,000  Mestizos   and   whites,    700,000;    In- 
116,000  dians,    700,000;    balance,    miscella- 
neous. 

2,020,000   .Alestizos    and    whites.    700,000;    In- 
48,290  dians,    700,000;    balance,     miscella- 
neous. 

2,030,000  Whites,    5,000;    negroes,    1827  000- 
10,200  mixed,  198.000. 

650,000  Mestizos    and   whites,   450,000-    In- 
46,250  dians,   200,000. 


Chile 

Area  (sq.  miles) 

Colombia 

Area  (sq.  miles) 

Costa  Rica 
Area  (sq.  miles) 

Cuba 

Area  (sq.  miles) 

Ecuador 

Area  (sq.  miles) 

Guatemala 
Area  (sq.  miles) 

Haiti 

Area  (sq.  miles) 

Honduras 
Area  (sq.  miles) 


Mexico  15,500,000  Whites,  3,000,000;  Mestizos    7  500- 

Area  (sq.  miles)       767,097  000;  Indians,  5,000,000.        '     '       ' 

700,000  Whites  and  Mestizos,  400,000;  bal- 

49,532  ance,  Indians,  negroes,  etc. 

450,000  Whites  and   Mestizos,  320,000;  ne- 

32,380  groes.    67,000 ;    miscellaneous,  '  63,- 
000. 


Nicaragua 
Area  (sq.  miles) 

Panama 

Area  (sq.  miles) 


168    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Paraguay  800,000   Nearly    all    Mestizos    and    Avhites; 

Aroa"(sq.  miles)       122,000  about' 25,000  forest  Indians. 

Peru  4.500,000    Whites,    585,000;    Mestizos,    1,125,- 

Area  (sq.  miles)       683,321000;    Indians,    2,700,000;    balance, 

miscellaneous. 

Salvador  1,300,000  Mestizos,   850,000;  whites,  230,000; 

Area  (sq.  miles)         13,176   Indians,  220,000. 

Santo  Domingo         657,275   Chiefly  Mestizos,  Indian  and  negi-o 
Area  (sq.  miles)         19,325   Ijlood   largely  represented. 

Uruguay  1,450,000   Chi(^fly   Mestizos   and   whites;   good 

Area  (sq.  miles)         72,172   percentage   of   Europeans;   Indians, 

100,000.  ^ 

Venezuela  2,850,000  Mestizos  and  whites,  2,000,000;  In- 

Area  (sq.  miles)       393,076   dian.s,    550,000;   negroes    (and   mix- 
tures), 300,000. 

Ill  China,  the  population  of  wliicli  is  estimated  at  over 
400,000,000,  almost  all  the  male  population  are  shaven, 
but  because  the  great  mass  of  people  have  barely  enough 
money  with  wdiicli  to  provide  for  the  necessities  of  life, 
they  cannot  afford  to  pay  $5,  or  its  equivalent  in  Chinese 
money,  for  a  safety  razor.  This  is  particularly  true  of 
the  great  class  of  coolie  laborers  whom  Chinese  custom 
requires  to  be  clean  shaven.  Furthermore,  the  country 
is  backward  and  even  those  people  wdio  can  afford  to  buy 
a  high-grade  safety  razor  are  slow"  to  take  up  new  con- 
veniences. Consequently,  in  China  the  sale  of  Simplex 
razors  is  limited  practically  to  foreigners,  Chinese  who 
have  studied  or  traveled  abroad,  and  those  who  possess 
the  means  and  are  progressive  enough  to  purchase  such 
an  article. 

India,  with  its  estimated  population  of  over  300,000,000, 
has  a  few  religious  sects  wdiich  require  men  to  wear 
beards,  but  as  in  China  the  great  majority  of  the  male 
population  are  clean  shaven.  Custom,  in  fact,  requires 
that  the  males  of  some  castes  shave  daily,  but  the  almost 
universal  condition  of  poverty  places  a  five-dollar  safety 
razor  beyond  the  reach  of  the  average  native.  Here 
again  the  company's  sales  are  limited  mainly  to  foreign- 
ers and  the  more  educated  natives. 


PRODLX'T   POLICY  169 

The  Simplex  Company  is  now  contemplating  the  man- 
ufacture of  a  low-priced  razor  to  be  retailed  at  $1,  or  its 
equivalent  in  foreign  currency.  This  razor,  although  of 
the  same  general  style  as  the  $5  model,  would  be  made  of 
cheaper  material  and  would  be  of  inferior  workmanship. 
This  model  would  perform  the  same  work  as  the  more 
expensive  razors  Init  would  not  be  nickel  or  silver  plated, 
in  fact  it  would  not  even  l)e  buffed  or  polished  after  being 
ground.  Only  two  l:)lades  would  be  included  in  the  orig- 
inal package  which  would  be  enclosed  in  a  cloth-covered 
heavy  cardboard  box  instead  of  in  a  plush-lined  leather- 
covered  metal  case. 

If  the  company  slK)uld  take  such  a  step  it  would  be 
abandoning  its  old  })olicy  of  securing  a  profit  from  the 
sale  of  its  i-azors,  since  the  $1  model  would  have  to  be 
sold  at  cost.  The  profit  resulting  from  such  a  policy 
would  lie  in  the  large  nunil)er  of  customers  for  the  sale 
of  blades,  but  because  of  the  resharpening  device  accom- 
panying each  razor,  Simi)lex  blades  would  not  be  sold  in 
such  large  quantities  as  would  be  the  case  with  blades 
which  cannot  be  readily  resharpened  by  the  user.  Still 
another  reason  has  caused  the  company  to  refrain  from 
taking  such  a  step  ;  the  firm  fears  that  it  could  not  restrict 
the  sale  of  the  $1  razor  to  the  Far  Eastern  and  Latin- 
American  markets  without  injuring  its  good-will  in 
Europe  as  well  as  in  the  United  States  and  it  is  not  quite 
sure  what  results  it  could  expect  from  selling  a  $1  razor 
in  all  markets. 

Should  the  Simplex  Razor  Company  manufacture  a  $1 
model? 


170    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  36 

Talbot  Electric  Wire  Company — Changing  Product  to 
Meet  Competition 

German  and  Japanese  linns  are  constantl}'  becoming 
more  important  factors  in  supplying  electric  wire  and 
cable  to  South  American  markets.  These  foreign  com- 
panies are  said  to  have  the  advantage  of  low  costs,  both 
because  their  wage  scales  are  far  below  those  in  effect  in 
wire  factories  in  the  United  States  and  because  in  manj^ 
instances  they  are  able  to  secure  cheaper  freight  rates 
than  those  quoted  to  American  manufacturers.  Not  only 
do  the  discount  and  exchange  rates  aid  German  manu- 
facturers in  underselling  competitors  in  the  South  Ameri- 
can market,  but  both  German  and  Japanese  firms  are 
placing  on  the  market  wire  and  cable  of  inferior  quality 
and  workmanship  on  which  they  are  able  to  quote  still 
lower  prices.  In  many  cases,  therefore,  American  man- 
ufacturers of  electric  wire  and  cable  have  been  either 
driven  from  the  field  or  forced  to  engage  in  price  com- 
petition entailing  heavy  loss.\ 

(The  Talbot  Electric  Wire  Companj"  has  never  lowered 
the  standard  of  its  export  product  although  several 
American  firms  have  manufactured  wire  of  inferior  qual- 
ity in  order  to  meet  the  competition  of  foreign  houses. 
^ts  annual  sales  in  the  South  American  market  have 
fallen  from  over  $200,000  to  less  than  $30,000  within  the 
past  two  years^  Although  its  total  sales  volume  is  well 
over  $4,000,000,^80  tjiat  its  export  business  is  a  compara- 
tively small  item,  the  firm  is  progressive  and  anxious 
to  build  up  a  larger  export  trade.  The  advisability  of 
manufacturing  a  cheaper  grade  of  \\ire  is  therefore  being 
considered. 

If  inferior  wire  is  put  on  the  market,  however,  there 
is  some  danger  that  the  future  sales  of  the  company 
might  be  injured.  Many  Latin  American  purchasers  are 
beginning  to  demand  better  quality  goods,  since  they  are 
becoming  educated  to  the  fact  that  cheap  merchandise 
does  not  always  mean  the  lowest  cost  in  the  long  run. 


(i 


PRODUCT  POLICY  171 

In  Mexico  particularly  the  Talbot  Electric  Wire  Com- 
pany has  found  an  increasing  demand  for  high-grade  wire 
of  American  manufacture. 

One  means  of  meeting  the  situation  would  be  to  man- 
ufacture not  only  an  inferior  grade  of  wire  for  export 
purposes,  but  also  another  grade  of  the  same  standard 
as  that  used  in  the  United  States.  To  do  this,  however, 
would  require  a  somewhat  increased  operating  cost  in  the 
factory,  I  because  of  the  changes  required  in  machinery, 
'"'urthermore,  if  the  inferior  wire  were  known  as  the 
Talbot  product  the  reputation  of  the  company  might  be 
injured,  even  if  it  continued  to  manufacture  high-grade 
products.  It  might  be  possible  to  sell  the  inferior  mre 
and  cable  under  another  name,  but  if  this  were  the  case 
foreign  importers  would  not  realize  that  they  were  pur- 
chasing goods  from  the  Talbot  Company  and  the  firm 
might  have  almost  as  much  difficulty  in  re-introducing  its 
high-grade  product  at  a  later  date  as  if  it  had  stayed  out 
of  the  field  altogether. 

Should  the  Talbot  Electric  Wire  Company  manufacture 
an  inferior  grade  of  wire  and  cable  for  export  purposes?) 


Problem  37 
The  White  &  Russell  Company — Style  Policy 

The  White  &  Russell  Company  of  Cincinnati  manufac- 
tures a  line  of  women's  suits  and  cloaks  of  medium 
grades.  Its  business,  which  amounts  to  $5,000,000 
annually,  has  developed  rapidly  in  the  past  few  years 
X)rimarily  because  of  a  successful  national  advertising 
campaign  and  careful  selection  of  exclusive  agents,  com- 
bined with  a  product  which  because  of  its  careful  de- 
signing and  excellent  tailoring  has  achieved  an  enviable 
reputation.  Exclusive  agents  in  towns  throughout  the 
country  are  visited  by  the  company's  traveling  salesmen 
twice  a  year. 

While  sales  have  increased  from  year  to  year,  the  peak 
loads  of  production  and  selling  have  increased  propor- 


172    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

tionately.  The  company  lias  consistently  endeavored  to 
find  some  means  of  evening  up  the  load  in  order  to  utilize 
its  manufacturing-  capacity  and  its  selling  organization 
for  more  than  six  to  eight  months  a  year.  Salesmen 
have  been  sent  out  on  special  between-season  trips,  but 
without  sufficient  success  to  warrant  continuance  of  the 
plan.  The  company  has  adopted  the  plan  of  centralizing 
a  portion  of  its  effort  upon  a  few  semi-staple  designs, 
which  are  not  changed  much  from  year  to  year ;  therefore, 
designs  which  might  be  manufactured  during  lulls  in  the 
manufacturing  season  and  which  could  be  carried  over 
without  such  a  considerable  loss  as  would  be  occasioned 
bj^  carrying  over  extreme  designs.  While  this  device  has 
been  fairly  successful  in  the  case  of  two  or  three  men's 
clothing  concerns,  it  has  not  proved  a  sufficient  remedy 
for  the  situation  of  the  White  &  Russell  Company. 

At  present  the  officials  of  the  firm  are  interested  in  the 
South  American  market  as  a  possibility  for  disposing  of 
a  sufficient  amount  of  the  product  to  enable  them  to  carry 
on  production  the  year  'round.  They  have  received  a 
copy  of  the  report  of  the  iMiddle  Western  Garment  Man- 
ufacturers' Association*  and  have  concluded  that  there 
is  a  sufficient  market  for  garments  of  the  grade  which 
they  manufacture,  provided  it  is  developed  promptly  and 
intelligently,  but  tlie\'  wish  to  know  what  policy  they 
should  adopt  with  reference  lo  the  South  American  mar- 
ket. It  would  be  particularly  advantageous  if  the  styles 
which  are  sold  in  the  United  States  for  the  fall  season, 
for  instance,  could  at  the  end  of  that  season  continue  to 
be  sold  in  the  South  American  market. 

Problem  38 

Hollywood  Tvpewkiteu  Co^^ipany- — Policy  as  to  Finish 

The  agent  of  the  Hollywood  Typewriter  Company  in 
Vienna  reports  that  com])eting  makes  of  typewriters  are 
coming  into  the  market  with  gold  and  red  band  decora- 
tions instead  of  the  dull  ))lack  finish  ])revalent  on  HoUy- 

*See  Problem  No.  31. 


PRODUCT   POLICY  173 

wood  machines.  There  has  apxjarently  been  a  reaction 
against  the  somber  colors  of  war  times  and  everywhere 
there  is  a  demand  for  brighter  designs.  Although  the 
Hollywood  machine  bears  on  the  front  in  gold  the  name 
and  seal  of  both  the  company  and  its  agent  in  Vienna,  the 
people  apparently  prefer  a  still  larger  amount  of  decora- 
tion. The  agent  says  that  on  the  day  he  mailed  this 
report  two  customers  refused  to  l)ny  Hollywood  machines, 
preferring  the  finish  and  appearance  of  the  more  highly 
decorated  German  machines.  He  begs  the  company  to 
change  the  finish  of  its  machines  to  be  sent  to  Austria  and 
to  adopt  the  extensive  red  and  gold  stripe  decorations 
found  on  other  machines  in  this  market. 

For  several  years  prior  to  the  war  the  Hollywood 
Typewriter  Company  exported  a  substantial  number  of 
its  machines  to  Europe,  establishing  agencies  in  Austria, 
Russia,  Greece,  Italy,  France,  and  England.  It  also  ex- 
ported a  number  of  machines  to  Cuba,  Porto  Rico,  Mex- 
ico, and  Central  America  and  a  few  to  Brazil,  Argentina, 
and  Chile.  These  machines  were  practically  the  same  as 
the  typewriters  sold  in  the  domestic  market,  except  that 
the  type  was  changed  according  to  the  style  of  alphabet 
in  use  in  the  country  in  which  they  were  to  be  sold. 
Yielding  to  the  demands  of  its  foreign  agents  at  that 
time,  the  company  adopted  a  red,  blue,  and  gold  decora- 
tion for  its  machines  which  were  exported.  Foreign  cus- 
tomers were  apparently  satisfied  with  this  bright  design 
and  under  the  stimulus  of  extensive  advertising,  sales 
increased  rapidly  up  to  the  year  1914. 

The  outbreak  of  the  World  "War  curtailed  sales  to 
Europe,  but  owing  to  the  increased  business  in  the  domes- 
tic market  this  loss  was  not  seriously  felt.  After  the 
United  States  entered  the  war  in  1917,  a  movement  was 
started  to  standardize  all  products  and  reduce  unneces- 
sary expenditures  to  a  minimum.  In  accordance  with 
this  program  the  Hollywood  Typewriter  Company  sim- 
plified the  finish  of  its  machines  and  did  away  Avith  the 
red,  blue,  and  gold  decorations.  Latin  America  was  the 
principal  foreign  field   in   which  Hollywood  typewriters 


174    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

were  being  sold  at  that  tin\e.  Salesmen  in  South  Amer- 
ica and  Mexico  denounced  the  change,  recalling  the  story 
of  the  Latin  American's  love  for  colors;  how  a  line  of 
cook  stoves  failed  to  sell  in  Mexico  until  they  were  all 
painted  bright  red  or  yellow;  that  playing  cards  would 
not  sell  in  Venezuela  until  a  bright  red  circle  was  put  on 
their  backs ;  and  how  the  brightest  Paris  gown  seemed  to 
have  a  ready  sale  in  Argentina.  To  the  surprise  of  the 
salesmen  and  of  some  of  the  officials  of  the  Hollywood 
Company,  sales  in  Latin  America  continued  to  hold  up 
fully  as  well  as  before  the  change  in  finish  was  adopted. 
In  fact,  the  company  received  a  number  of  favorable 
comments  from  their  South  American  customers  approv- 
ing of  the  change  because  it  made  the  machines  appear 
more  refined. 

In  the  central  part  of  Europe  the  Hollywood  Com- 
pany's present  and  potential  business  is  sufficient  to  war- 
rant giving  all  machines  sent  to  this  market  the  red  and 
gold  decoration  requested  if  this  step  is  really  desirable, 
but  the  company  does  not  care  to  undertake  this  change 
unless  increased  sales  will  result.  With  German  compe- 
tition based  primarilj^  on  price,  exchange  rates,  and  the 
high  taritf  on  goods  imported  into  central  European 
countries,  even  the  small  additional  cost  of  striping  each 
machine  should  be  avoided  if  possible.  On  the  other 
hand,  the  Hollywood  Typewriter  Company  intends  to 
leave  no  stone  unturned  that  will  aid  it  in  regaining  its 
hold  on  this  portion  of  the  foreign  market. 

Should  the  Hollywood  Typewriter  Company  change 
the  finish  of  its  machines  for  the  foreign  market? 


PRODUCT  POLICY  175 

Problem  39 

Federated  Woolen  Company — Handling  of  Cotton  Textiles 
AND  Other  Allied  Lines 

For  a  number  of  years  the  Federated  Woolen  Com- 
pany confined  its  efforts  to  the  distribution  of  woolen 
and  worsted  cloth  in  the  United  States  and  Canada.* 
During  the  war  it  l)eg'an  exporting  worsted  fabrics,  prin- 
cipally to  South  America  and  a  small  force  of  American 
salesmen  was  built  up,  although  the  bulk  of  its  sales  were 
made  through  local  agents.  For  a  short  time  after  hos- 
tilities had  closed  sales  continued  to  increase,  but  in  the 
summer  of  lf)2()  a  number  of  orders  then  on  the  books 

*  Before  the  war  tlie  European  woolen  and  worsted  mills  held  a  com- 
petitive advantage  in  the  export  field  because  of  the  large  number  of 
styles  they  were  willing  to  make  up  on  small  orders.  This  development  of 
new  styles  was  a  point  to  which  European  manufacturers  had  given  much 
attention  and  they  were  constantly  bringing  out  new  designs.  Operating 
comparatively  small  units,  they  were  in  a  position  to  cater  to  the  varied 
tastes  of  foreign  people.  Although  the  American  weaver  operated  a 
slightly  larger  number  of  looms  than  did  the  weaver  abroad,  the  refine- 
ments of  the  processes  of  fabrication  in  both  Europe  and  the  United 
States  were  practically  the  sniiie,  but  because  of  the  liigher  wages  paid 
American  mill  operatives,  the  .nlvantago  ct  lower  jirdiliiction  costs  lay  with 
the  European  producers. 

Even  in  the  United  States  there  was  a  substantial  demand  for  woolen 
and  worsted  cloth  of  foreign  manufacture,  as  shown  by  the  amounts  of 
exports  and  imports  for  a  period  of  five  years  immediately  pre<^eding 
the  outbreak  of  the  World  War,  published  in  "Commerce  and  Xavigation 
of  the  United  States"   for  ]913: 

Total   Imports   of   Dress   Goods  by  Manufactt'rf.rs   of   Women's   and 
Childr?:n's   Clothes 
Total    Number  Square*  Y.-irds  Value 

lOO'.t  34,619,747  .*6,761,536 

1910  48,34.5,084  9,374,140 

191 1  30,414,343  (3,262,566 

1912  15,415,245  3,279,198 

1913  15,712,155  3,321,626 

Imports  of  Cloth   by  Manufacturers  of  Wearing   Apparel 

1909  $1,416,935 

1910  -   1,813, .542 

1911  ,   2,274,756 

1912  >■   2.171,477 

1913  ■■    2,158,384 

Exports  of  All  Wool  Cloth  and  Dress  Goods 

1909  .$  422,024 

1910  660i010 

1911  .       842,998 

1912  792,879 

1913  1,099,996 


176    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Avore  cancelled.  Because  of  the  marked  falling  off  in 
volume  of  sales,  the  salesforce  was  reduced.  Although 
many  had  hoped  for  a  revival  in  the  woolen  export  busi- 
ness, it  has  not  materialized  and  the  company's  Latin- 
American  sales  are  limited  to  a  few  suitings.  At  the 
present  time  the  Federated  Woolen  Company  is  w^eigh- 
ing  the  expediency  of  taking  on  lines  of  cotton  textiles, 
silk  hosiery,  and  similar  products  for  sale  in  Latin- 
America. 

In  the  production  of  cotton  cloth  American  manufac- 
turers have  a  tremendous  advantage  over  European  man- 
ufacturers because  of  better  machinery,  superior  methods 
of  fabrication,  and  the  economies  resulting  from  larger 
runs.  An  English  weaver  attends  twice  as  many  looms 
in  the  British  cotton  mills  as  does  the  weaver  on  the  con- 
tinent; yet  an  American  weaver  attends  from  two  to 
three  times  as  many  looms  as  the  English,  operator. 
Even  though  American  cotton  mill  operatives  receive 
much  higher  wages  than  do  foreign  workers  on  similar 
grades,  American  methods  of  cutting  the  cost  through 
quantity  production  are  superior  to  those  of  most  of  the 
foreign  mills.  These  reasons,  together  with  the  fact  that 
large  quantities  of  high-grade  cotton  are  gro^\^l  in  the 
United  States  each  year,  give  the  exporter  of  American 
cotton  textiles  an  advantage  over  foreign  houses. 

A  large  portion  of  the  business  and  commerce  of  Latin- 
America  is  transacted  in  the  coastal  cities.  Many  foreign 
manufacturers  have  not  the  capital,  organization,  or 
knowledge  to  deal  vdth  the  small  merchants  scattered 
through  the  towns  in  the  interior.  Large  import  and 
wholesale  houses  have  groA\ni  up  in  the  port  cities,  which 
purchase  all  kinds  of  supplies  to  be  sent  into  the  interior. 
By  handling  allied  textile  lines  for  which  there  is  a  sub- 
stantial demand,  the  Federated  Woolen  Company  sales- 
men should  be  able  to  increase  their  unit  sales  and  thereby 
reduce  their  overhead. 

The  sale  of  woolen  fabrics  is  a  highly  specialized  busi- 
ness, however,  quite  different  from  the  sale  of  cotton 
textiles.  Selling  houses  in  the  United  States  recognize 
this  fact  so  clearly  that  they  specialize  in  only  one  of  these 


PRODUCT  POLICY  177 

two  lines.  Following  this  practice  in  the  domestic  mar- 
ket, the  Federated  Woolen  Company's  salesmen  have 
never  handled  cotton  textiles  or  allied  lines  and  the  same 
objections  against  branching  out  in  the  local  market 
should  hold  to  a  considerable  extent  for  the  foreign  field. 
In  Brazil  where  coarse  cotton  fabrics,  used  for  sheets  and 
pillow  cases,  are  produced  more  cheaply  than  in  the 
United  States,  the  sale  of  cotton  textiles  would  be  lim- 
ited to  the  higher  grades.  Since  a  number  of  highly 
specialized  cotton  textile  houses  have  been  operated  in 
the  South  American  market  for  several  years,  it  is  doubt- 
ful whether  Avholesalers  would  readily  transfer  their 
orders  to  the  Federated  Woolen  Company  which  has  but 
recently  branched  out  vdth.  lines  of  cotton  textiles  ancl 
silk  hosiery. 


Problem  40 

Tower  Company — Repair  Service  and  Contract  for 
Agents  Furnishing  Service 

A  number  of  complaints  of  defective  operation  have 
been  received  hj  the  Tower  Company  from  foreign  mills 
which  have  installed  Tower  textile  machinery.  Upon 
investigation  the  company  has  found  that  most  of  the 
troubles  reported  are  due  to  careless  handling  and  re- 
pairing of  the  machinery  rather  than  to  any  defects  in 
the  machinery  itself.  In  Japan,  India,  and  other  coun- 
tries, native  repair  crews  are  sometimes  not  familiar  with 
the  proper  care  and  operation  of  modern  textile  machin- 
ery. Some  of  the  machines  complained  of  have  been 
found  full  of  lint.  In  others  the  oil  had  been  allowed 
to  run  out  and  the  bearings  and  gears  were  burned  out. 
Still  other  machines  were  found  out  of  alignment.  Al- 
though the  Tower  machines  were  installed  properly  upon 
their  arrival  at  the  mill,  in  several  instances  it  had  been 
necessary  to  change  their  position.  In  resetting  these 
machines  the  repair  crews  frequently  failed  to  level  up 
the  base  or  to  secure  a  firm  foundation.     Inasmuch  as 


178    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

competitors  are  citing  these  instances  as  proof  that 
Tower  machines  are  defective  and  inferior,  the  company 
is  considering  estabhshing  a  repair  service  in  the  large 
textile  centers  such  as  Bombay,  Osaka,  Shanghai,  Man- 
chester, and  Leeds. 

The  Tower  Company  sells  its  machines  through  its 
agents  Avho  are  located  in  the  principal  textile  centers  of 
the  world.  These  representatives  carry  stocks  of  spare 
parts  and  a  small  number  of  machines.  To  assist  these 
agents  in  making  sales  and  to  supervise  the  installation 
of  its  machines,  the  company  maintains  a  corps  of  travel- 
ing engineers.  These  travelers  call  on  even  the  outlying 
plants  at  least  once  a  year  to  give  advice  and  to  keep  in 
touch  with  the  managers  so  that  no  orders  for  new  equip- 
ment will  be  placed  without  consideration  of  the  Tower 
Company's  product. 

Repairs,  adjustments,  and  other  changes,  however,  are 
left  to  the  repair  crew  of  each  mill.  It  has  been  the  polic}^ 
of  the  compam^  to  sell  its  machines  outright  and  not  to 
lease  or  sell  a  service.  If  a  repair  service  were  estab- 
lished, a  charge  would  have  to  be  made  for  its  work. 
Some  of  the  mills  might  claim  that  the  repairs  were  due 
to  defects  in  the  machines  and  ought  to  be  made  free  of 
charge.  A  number  of  mill  owners  would  probably  object 
to  having  repairs  made  by  outsiders,  preferring  to  have 
their  own  crews  handle  this  work.  Moreover,  many  of 
the  mills  using  the  company's  machines  are  located  in 
small  towns  at  some  distance  from  any  of  these  large 
centers,  and  obviously  the  number  of  points  at  which  the 
company  could  afford  to  maintain  a  repair  crew  is  small. 

One  of  the  managers  states  that  the  company  has 
always  adopted  the  policy  of  replacing  any  defective 
parts  free  of  charge,  but  that  the  mill  owners  must  be 
responsible  for  proper  care  and  maintenance.  In  his 
opinion  the  company's  travelers  should  devote  more 
time  to  explaining  the  proper  care  of  Tower  machines  to 
the  repair  crews  and  spend  less  time  in  the  front  office 
with  mill  owners.  The  travelers,  on  the  other  hand,  re- 
port that  the  same  errors  are  repeated  in  spite  of  their 
attempts  to  instmct  and  train  repair  crews. 


PRODUCT  POLICY  179 

Should  the  Tower  Company  estabhsh  a  repair  service 
for  the  foreign  mills  which  have  purchased  its  machines ! 
If  so,  what  attitude  should  the  company  adopt  toward 
an  order  from  a  mill  located  in  a  district  where  the  com- 
pany was  not  able  to  furnish  this  service? 

Paet  II 

The  Tower  Company  is  also  considering  whether  or 
not  its  agents  in  the  large  textile  centers  should  be  under 
contract  to  carry  spare  parts  and  maintain  a  staff  capa- 
ble of  giving  instructions  in  the  replacing  of  such  parts. 
At  present  these  agents  who  handle  both  the  company's 
machines  and  spare  parts  are  not  under  contract  as  to  the 
amount  they  must  carry,  and  several  instances  have  oc- 
curred where  mills  were  not  able  to  secure  replacement 
parts  immediately  but  had  to  wait  until  an  order  could 
be  shipped  from  the  States.  Delays  of  this  type  are  the 
cause  of  much  dissatisfaction  on  the  part  of  the  foreign 
mill  owners,  since  a  disal)led  machine  is  of  little  use  un- 
less broken  parts  can  be  replaced  promptly. 

The  export  manager,  however,  has  always  held  the 
view  that  a  contract  is  of  little  value  except  in  case  of 
legal  action.  In  foreign  countries  the  laws  and  court 
decisions  are  usually  against  American  firms.  The  com- 
pany has  never  entered  into  formal  contracts  "^^'ith  its 
agents  because  it  did  not  care  to  be  bound  to  a  firm  which 
later  might  prove  to  be  an  unsatisfactory  representative. 
Furthermore,  the  export  manager  does  not  believe  that 
the  Tower  Company  is  in  a  position  to  say  how  many 
parts  should  be  carried  by  each  agent.  He  is  of  the 
opinion  that  a  good  agent  will  always  carry  enough  spare 
parts  on  hand  to  satisfy  his  customers  and  that  occasional 
mistakes  cannot  be  prevented  even  by  having  a  signed 
contract. 

Should  the  Tower  Company  require  its  agents  to  enter 
into  a  contract  covering  the  services  to  be  rendered  and 
the  number  of  spare  parts  to  be  carried  in  stock? 


180    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  41 
The  Shedd  Rubber  Company— Service  and  Guarantee 

The  sales  of  rubber  clincher  tires  of  the  Shedd  Rubber 
Compaii}'  in  the  Belgian  market  in  1921  were  gradually 
falling  off  because  of  inability  to  meet  foreign  prices. 

The  output  of  this  company  consisted  of  about  30% 
canvas  rubber-soled  shoes  and  70%  rubber  tires,  about 
4%  of  the  tires  being  exported.  During  1917  the  company 
began  to  sell  tires  to  the  domestic  trade  on  a  mileage 
guarantee,  the  company  agreeing  that  if  a  tire  wore  out 
before  it  had  been  used  3,000  miles  the  customer  would 
be  given  an  adjustment  in  the  price  of  a  new  tire.  This 
policy  was  followed  because  at  that  time  rubber  tires 
were  a  new  product  and  had  not  been  fully  perfected  and 
it  was  necessary  that  the  company  stand  behind  its  prod- 
uct. Grradually,  however,  the  manufacturing  process  was 
improved  and  the  life  of  the  tire  became  longer.  The 
guarantee,  was  then  extended  to  4,000  miles,  5,000,  and 
finally  to  8,000  miles.  In  1921,  the  company  terminated  its 
guarantee  policy.  It  appeared  to  the  company  that  the 
privilege  Avas  abused  by  customers.  Many  customers 
would  make  a  claim  for  an  adjustment  stating  that  the 
tire  had  been  run  only  4,000  miles  whereas  it  had  really 
been  run  10,000  miles.  Although  terminating  the  guaran- 
tee policy  the  company  was  still  willing  to  make  an  adjust- 
ment in  case  there  was  an  inherent  defect  in  the  tire. 

The  company  had  never  done  a  great  deal  in  the  way 
of  service  for  customers.  It  started  an  educational  cam- 
paign in  1919  on  a  small  scale  regarding  the  proper  air 
pressure  in  pounds  per  inch  of  tire  or  per  pounds  car- 
ried, the  damage  caused  by  car  tracks,  and  the  danger 
of  small  cuts.  This  campaign,  which  was  carried  on  by 
advertisements  and  pamphlets,  languished  in  1920  and 
died  out  in  1921. 

In  1919  the  total  exports  of  tires  from  the  United 
States  to  Belgium  was  $536,000;  in  1920,  $1,140,000.  Dur- 
ing May,  June,  and  July  1920  exports  were  $255,000; 
during  the  same  months  of  1921  they  were  $6,000. 


PRODUCT  POLICY  181 

In  August  1921,  the  export  sales  manager  of  the  Shedd 
Rubber  Company  received  the  following  letter  from  the 
Belgian  representative : 

''Tire  service  is  an  argument  very  little  used  by  Euro- 
pean producers,  and  in  fact  few  American  sales  man- 
agers have  gone  out  of  their  way  to  teach  their  local 
representatives  the  methods  by  which  the  sales  of  tires 
and  tire  accessories  may  be  made  a  profitable  adjunct  to 
any  garage  business.  One  case  is  noted  of  an  agent  in 
Belgium  for  two  well-known  American  cars.  This  agent 
has  now  in  circulation  about  200  machines,  sold  to  satis- 
fied customers.  It  had,  however,  not  occurred  to  him 
that  tire  sales  to  this  more  or  less  permanent  clientele 
represented  a  comparatively  easy  and  constant  source  of 
profit  until  this  fact  was  brought  to  his  attention  by  the 
representative  of  an  American  tire  company.  There  is 
thus  no  doubt  that  instruction  of  local  agents  for  tires 
and  cars  in  the  essentials  of  tire  salesmanship  would 
have  a  good  effect  on  sales  of  American  tires,  since  it  is 
only  by  service  that  the  initial  price  advantage  of  the 
European  makes  is  overcome,  while  actual  use  on  the 
road,  once  a  tire  is  sold,  generally  should  influence  a  Bel- 
gian car  owner  in  favor  of  the  American  article.  Special 
instructions  are  also  needed  on  inflation,  as  Belgian 
chauffeurs  frequently  run  comparatively  low  pressures 
in  order  to  make  the  cars  ride  more  easily.  The  life  of 
an  American  tire  properly  inflated  is  generally  three  or 
four  times  that  of  the  best  European  products." 

Should  the  policy  of  service  and  tire  guarantee  have 
been  extended  to  the  Belgian  market  ? 


182    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  42 

The  Shaler  Company — Brand  Policy* 

The  Shaler  Company  of  Philadelphia  manufactures  22 
different  varieties  of  knitting  yarns  used  chiefly  in  the 
knitting  of  sweaters,  mittens,  woolen  hosiery,  scarves, 
etc.  The  company  resells  all  "seconds"  of  wool,  and 
places  upon  the  market  under  its  own  brand  only  first- 
quality  yarns.  During  the  past  ten  years  the  company 
has  intensively  cultivated  domestic  consumer  demand  by 
means  of  advertising  in  periodicals  of  national  circula- 
tion, by  the  distribution  of  instruction  books  upon  knit- 
ting, by  demonstrations  in  large  stores,  and  by  the  use  of 
dealer  helps,  and  a  large  demand  for  its  trade-marked 
yarns  has  been  built  up.     However,  the  company  has 

*In  addition  to  the  various  references  upon  trade-marks  as  used  in  the 
domestic  trade,  see  the  following:  Dudeney,  The  Exporter's  Handbooh 
and  Glossary,  Chap.  XV;  E.  B.  Filsinger  (Irving  National  Bank),  Trad- 
ing with  Latin  America,  pages  70-82;  Preciado,  Eccporting  to  the  World, 
Chap.  XXIII;  Savay,  PrincipTes  of  Foreign  Trade,  Chap.  XL;  Vedder, 
American  Methods  in  Foreign  Trade,  Chap.  XXV;  Eder  (Business  Train- 
ing Corporation),  Foreign  and  Borne  Law,  Chap.  XIIT;  Tariff  Series 
No.  31,  Registration  of  Trade-marks  in   Latin  America. 

The  World's  Markets. 

March    1919,     p.     l(i — "Trjide   M.iik   Registration  in  Argentina." 
June      1919,     p.     22— "Tlie    Tr;ide    Mark   Laws   of   Brazil." 

Export  Trade  and  the  Exportir's  L'crieir. 

Dec.     4,   1920,   p.  11— "Tr.idc  :M;irks  Often  Rejeeted  on  Grounds  of 

Similarity. ' ' 

Dec.   18,   1920,   p.  24— "  Xew   Argentine  Tnide   .M;irk  Law  Will   En- 
sure  Greater  Protection. ' ' 

Jan.     8,   1921,  p.  5 — "International      Trade-mark     Piracy     Possi- 
bilities. ' ' 

Jan.   22,   1921,  p.  46— "The   Significance  of  the  Chinese   'Chop.'  " 

Feb.  12,   1921,  p.  5— "When     Should     a     Trade-mark     Be    Trans- 
lated?" 

Feb.   26,    1921,  p.  9— "On      Protecting      a      Trade-mark      'in      all 

Countries. '  ' ' 

Aug.  20,  1921,  !>.  14— "Germany    Will    Xot    Ilnve    Norwegian    Snr- 

dines. ' ' 

Aug.  20,  1921,  p.  IS—"  'By   Their    Trade-marks.'  " 

Sept.  10,  1921,  p.  16— "How     Trade-marks     in     China      Are     Pro- 
tected. ' ' 

Oct.      8,   1921,   p.  o— "Your    'Chop'    in    China." 

Dec.  31,   1921,   p.  i;5— "Pitfalls  in  Foreign  Trade-mark  Selection." 

Feb.   11,   1922,  p.  13 — "Legal     Aspects     of     Foreign     Trade-mark 
Eegistration. ' ' 

From  time  to  time  there  has  been  agitation  for  an  international  trade- 
mark for  all  goods  manufactured  in  this  country;  there  are  numerous 
articles  in  Printers'  Ink  upon  this  subject. 


PRODUCT  POLICY  183 

never  attempted  to  develop  the  foreign  market  in  com- 
petition with  European  exporters.  Small  amomits  have 
been  sold  in  South  American  countries,  but  the  prob- 
lems of  the  domestic  market  have  occupied  the  attention 
of  the  officials  so  fully  as  to  preclude  the  active  develop- 
ment of  the  foreign  market  up  to  this  time. 

In  the  fall  of  1921  the  Shaler  Company  received  an 
order  for  $300,000  worth  of  yarn  from  an  importer 
located  in  Buenos  Aires.*  The  order  was  to  be  filled  only 
if  the  Shaler  Company  manufactured  a  grade  of  yarn 
inferior  to  their  best  and  only  if  the  importer's  private 
label  could  be  placed  upon  the  jsn'ii.  Thus,  in  two  re- 
spects the  filling  of  the  order  would  cause  a  departure 
from  established  policies:  first,  in  manufacturing  an 
inferior  grade  of  yarn  in  spite  of  the  fact  that  the  com- 
pany has  always  taken  sjoecial  pains  to  sell  nothing  but 
the  first-quality  yarn.  In  the  second  place,  the  company 
has  since  the  beginning  of  its  advertising  campaign  con- 
sistently refused  to  fill  orders  for  private  brands, 
although  many  such  orders  have  been  received  from 
domestic  dry  goods  jobbers.  Nevertheless,  one  of  the 
company's  mills  was  shut  down  for  lack  of  orders  at 
that  time  and  the  initial  order  from  this  Argentine  im- 
porter would  have  assisted  considerably  to  reduce  over- 
head and  to  keep  the  organization  together.  The  order 
has  also  opened  up  the  eyes  of  the  officials  of  the  com- 
pany to  the  possibilities  of  the  South  American  market. 

The  company  must  therefore  decide  whether  or  not  to 
accept  the  order,  and  in  deciding  determine  upon  a  defi- 
nite policy  wdth  respect  to  private  brands  in  foreign  trade. 
If  private  brands  are  not  to  be  used,  decision  should  also 
be  made  upon  the  use  of  the  manufacturer's  brand.  If 
the  Shaler  Company  decides  to  develop  foreign  markets 
for  its  yarn,  shall  it  use  the  brand  which  has  been  used 
in  the  domestic  market  in  all  foreign  markets  or  shall  it 

*Before  the  war  it  was  customary  to  send  Argentine  wool  to  Germany 
for  spinning.  The  yarn  received  in  return  did  not  possess  the  elasticity 
which  the  yarns  of  the  Shaler  Company  possessed  and  were  therefore  not 
so  suitable  for  knit  outer  wear  as  those  made  in  Philadelphia,  but  they 
were  sold  at  about  30%  less  than  the  Shaler  Company  could  charge  for  its 
yarn.  Further  study  of  the  South  American  market  showed  also  that  the 
women  of  South  America  were  generally  less  adept  in  knitting  and  in  de- 
signing garments  made  from  yarn  than  their  sisters  in  the  United  States. 


184    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

establish  different  foreign  brands  f    Shall  the  same  brand 
be  used  for  all  foreign  markets? 

The  sales  manager  of  the  company,  in  considering  the 
lack  of  knowledge  of  South  American  women  concerning 
the  use  of  yarns,  proposed  the  establishment  of  retail 
stores  in  Rio  and  Buenos  Aires,  the  purpose  of  which 
should  not  be  primarily  that  of  selling  yarn  but  rather 
to  serve  as  demonstration  establishments  in  which  classes 
might  be  conducted  and  in  which  exhibitions  might  be 
made  of  knitted  garments ;  this  would  assist  development 
of  a  demand  for  yarn  by  novel  means  unnecessary  in  the 
domestic  market  because  of  the  general  knowledge  of  its 
uses. 


Problem  43 

Federated  Paper  Company — Registration  of  Trade-Marks 

The  general  manager  of  the  Federated  Paper  Com- 
jjany,  which  distributes  paper,  printing  machinery,  type- 
writers, and  office  supplies  in  the  foreign  field,  recently 
received  a  report  from  its  branch  manager  in  Argentina 
suggesting  that  the  company  register  the  trade-marks 
of  all  the  manufacturing  companies  whose  products  it 
sells,  regardless  of  whether  or  not  these  products  are 
being  sold  in  Argentina.  The  Argentinean  manager 
stated  that,  although  he  realized  the  cost  of  such  registra- 
tion would  be  high,  he  wished  to  point  out  that  whereas 
in  England  and  the  United  States  no  one  can  register 
a  trade-mark  Avho  is  not  actually  using  that  trade-mark 
in  his  business,  in  Latin  American  countries  a  trade-mark 
can  be  registered  at  any  time  by  anyone  so  long  as  he 
pays  the  registration  fee.  Furthermore,  in  the  United 
States  the  ownership  of  a  brand  depends  not  alone  upon 
registration  but  upon  prior  use.  Even  if  a  brand  has 
been  registered  and  used  for  several  years  by  a  man  in 
interstate  commerce,  in  dealing  with  a  foreign  country, 
or  with  an  Indian  tribe,  the  oAvnership  of  the  brand  is 
not  determined  merely  by  registration.  If  another  com- 
pany can  prove  that  it  has  used  this  brand  previously. 


PRODUCT  POLICY  185 

the  government  protects  its  right.  In  Argentina,  as  well 
as  in  many  other  South  American  countries,  however, 
the  owner  of  a  trade-mark  is  the  man  who  first  secures 
this  registration,  regardless  of  the  length  of  time  that  it 
has  been  in  use  by  another  company. 

This  branch  manager  called  attention  to  the  fact  that 
the  Federated  Paper  Company  had  already  had  diffi- 
culties in  Latin  America  in  one  or  two  instances  because 
of  the  previous  registration  of  some  of  its  trade-marks 
on  printing  machinery  and  that  although  the  company 
had  been  able  to  get  around  these  difficulties  in  these 
instances  by  dropping  the  word  "machinery"  out  of  the 
name,  nevertheless  the  situation  was  serious  as  evidenced 
by  the  attitude  taken  by  several  American  exporters  who 
had  registered  their  trade-marks  in  Argentina  regardless 
of  whether  their  products  w^ere  being  sold  in  that  country 
or  not. 

In  the  opinion  of  the  general  manager  of  the  Feder- 
ated Paper  Company,  all  these  stories  concerning  the 
necessity  of  trade-mark  registration  for  all  the  products 
sold  by  American  exporters,  were  doubtless  instigated  by 
registry  officials  of  the  different  countries  who  wanted 
to  secure  as  large  fees  as  possible.  Even  if  a  citizen  of 
Argentina  or  some  other  country  did  register  a  trade- 
mark for  some  of  the  lines  which  the  company  carried 
but  did  not  sell  in  Argentina,  the  good-will  of  the  Feder- 
ated Paper  Company  or  its  subsidiary  company  would 
not  be  injured  unless  this  man  actually  manufactured 
these  allied  lines.  The  general  manager  said  that  as  long- 
as  the  company  sold  but  few  of  its  products  in  Argentina, 
he  saw  no  reason  why  it  should  register  the  trade-marks 
of  all  manufacturers  of  paper,  printing  machinery,  tj^pe- 
writers,  and  office  supplies  whose  products  it  sold.  If, 
for  example,  a  South  American  should  register  the  trade- 
mark of  a  grade  of  paper  manufactured  by  the  Case  Com- 
pany, the  latter  could  easily  continue  to  sell  its  paper  in 
South  America  by  changing  the  mark  and  stating  that 
it  was  a  new  brand  of  paper  manufactured  by  the  Case 
Companj^     In  this  way,  the  good-will  l)uilt  up  by  the 


186    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Case  Company  would  be  transferred  to  any  brand  that 
it  manufactured. 

The  aysistant  manager  was  inchned  to  agree  mth  his 
chief  that  there  was  Httle  need  for  the  registration  of 
trade-marks  of  products  the  sale  of  which  the  company 
did  not  regard  as  important  in  Argentina,  but  he  was  not 
inclined  to  adopt  the  same  policy  in  China.  He  called 
the  attention  of  his  superior  to  the  following  extract  from 
an  article  in  Printers'  Ink  for  May  15,  1919 : 

In  one  respect  the  piracy  of  trade-marks  in  the  Orient  is  for 
the  American  manufacturer  a  more  serious  matter  than  trade- 
mark piracy  in  Latin  America,  even  if  we  leave  out  of  consider- 
ation the  disparity  of  the  native  populations  that  might  possibly 
be  deceived.  In  Central  and  South  America  the  misappropria- 
tion of  trade-marks  is  usually  carried  on  by  pirates  who  frankly 
liold  the  marks  for  ransom.  Usually  they  make  no  effort  to 
mauufacture  under  the  brands  to  which  they  have  gained  title 
by  priority  of  registration.  At  worst,  the  Latin  American  di- 
lemma may  be  that  presented  by  a  sales  agent  who  has  registered 
marks  in  his  own  name  as  a  means  of  controlling  the  exclusive 
selling  rights  in  his  territory.  In  the  Far  East,  on  the  contrary, 
trade-mark  piracj^  is  almost  invariably  incident  to  imitation  of 
the  goods.  This  is  the  element  in  the  situation  that  holds  the 
greatest  menace  for  American  good-will. 

With  an  effrontery  that  might  provoke  a  smile  were  it  not  so 
serious  a  matter,  a  Japanese  raider  recently  simulated  every 
detail  of  the  dress  of  the  goods  of  a  well-known  American  spe- 
cialty. Not  only  was  the  trade-mark  reproduced,  but  all  the 
markings  of  the  American  package,  including  the  following  in- 
scriptions :  ' '  The  Original  and  Genuine, "  "  Bottle  and  Label 
Kegistered  in  China,  Japan,  and  Korea,"  "Beware  of  Imita- 
tions." Going  a  step  farther,  this  Japanese  flattery  has  lately 
extended  to  the  placarding  of  imitations  and  counterfeits  with 
the  line.  "Made  in  America,"  or  "Made  in  the  U.  S.  A."  The 
best-informed  representatives  in  the  Far  East  of  the  Bureau  of 
Foreign  and  Domestic  Commerce  predict  that  this  form  of  mis- 
representation is  likelj^  to  increase  considerably  in  future. 

In  a  recent  confidential  report  to  the  Bureau  of  Foreign  and 
Domestic  Connnerce,  Commercial  Attache  Arnold,  who  has  for 
years  watched  with  ever-increasing  misgivings  the  rising  tide 
of  trade-mark  piracy  in  the  Orient,  emphasized  the  fact  that 
American  manufacturers  do  not  take  into  consideration  that  the 
ordinary  Chinese,  not  reading  or  writing  English,  becomes  fa- 
miliar with  a  trade-mark  only  in  its  general  rather  than  in  its 
detailed  features.    lie  is  thus  easily  misled  by  imitations  even  if 


PRODUCT  POLICY  187 

the  imitations  carry  somewhat  diffevent  descriptive  matter  and 
vary  somewhat  in  the  English  names.  It  is  the  trade-mark  or 
"chop"'  that  counts  in  the  e^^es  of  tlie  ultimate  consumers  in  the 
Orient. 

The  Japanese  have,  more's  the  pity,  one  indisputable  answer 
for  many  of  the  protests  against  Japanese  appropriation  of 
American  trade-marks  in  Chinese  commerce.  They  point  to  the 
fact,  so  generally  overlooked  by  American  business  men,  that 
a  trade-mark  convention  between  the  United  States  and  Japan 
provides  for  reciprocal  protection  of  trade-marks  in  China,  pro- 
vided American  trade-marks  have  been  registered  in  Japan  for 
use  in  China.  Thus,  important  as  it  is  for  an  American  manu- 
facturer to  register  tentatively  his  trade-mark  in  China,  it  is 
even  more  important  that  he  register  at  Tokio,  in  order  to  fore- 
stall infringement  at  the  source.  Otherwise  a  Japanese  manu- 
facturer may,  by  virtue  of  his  trade-mark  registration  in  Japan, 
market  in  China  goods  that  are  a  bald  imitation  of  American 
products.  An  indignant  United  States  manufacturer  may  de- 
nounce an  infringing  mark  as  a  forgery.  But  it  is  impossible 
to  get  around  the  fact  that,  owing  to  his  negligence,  the  accused 
design  comes  into  the  Chinese  market  with  all  the  prestige  of 
a  mark  duly  registered  in  Japan,  bj^  a  Japanese  company  as  a 
Japanese  trade-mark.  Under  such  circumstances  the  United 
States  consular  officer  who  seeks  relief  or  redress  for  an  Ameri- 
can client  is  at  a  serious  disadvantage. 

The  general  manager  took  the  view,  however,  that 
there  was  even  less  cause  for  registering  a  trade-mark 
in  China  and  Japan  than  in  South  America,  for  the  com- 
pany sold  very  few  products  in  the  Far  East  and  even  in 
the  case  of  the  few  articles  such  as  fountain  pens,  special 
inks,  and  desk  supplies  which  it  sold  through  agents,  the 
company  suffered  no  real  danger  through  not  ha\T.ng  its 
trade-marks  registered.  He  said  that  it  was  all  right  to 
talk  about  the  Japanese  capitalizing  on  the  good-will 
of  American  manufacturers,  but  when  the  sales  of  a  prod- 
uct were  neghgible  or  the  company  had  not  even  entered 
the  Japanese  market  with  some  of  its  products  he  did 
not  see  how  the  Japanese  could  possibly  capitalize  on  the 
company's  good-will.  This  official  said  that  he  would  be 
in  favor  of  registering  the  trade-marks  of  all  the  com- 
panies, whose  products  the  Federated  Paper  Company 
handles,  in  an  international  bureau  which  would  auto- 
matically register  the  trade-marks  in  all  the  countries  of 


188    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  world.  The  United  States,  however,  was  not  a  party 
to  the  arrangement  of  Madrid  at  Berne.  Although  the 
American  Government  was  a  party  to  the  Buenos  Aires 
convention,  this  agreement  applies  only  to  fourteen  South 
American  nations  and  the  Federated  Paper  Company  has 
already  registered  all  its  trade-marks  with  the  central 
bureau  of  this  organization  in  Havana.  The  general 
manager  believes  this  to  be  a  step  in  the  right  .direction, 
but  considers  it  a  Avaste  of  time  and  mone}'^  to  register 
trade-marks  in  each  country  irrespective  of  the  com- 
pany's sales  volume  in  that  country. 

Should  the  Federated  Paper  Company  register  in 
Argentina  the  trade-marks  of  all  its  products,  or  should 
registration  be  restricted  to  only  those  lines  which  the 
company  is  endeavoring  to  push? 

Should  the  company  register  all  its  trade-marks  in 
Japan  and  China? 


Problem  44 

Williams  and  Knox  Company — 
Policy  of  Export  Commission  House 

The  Williams  and  Knox  Company  is  a  commission 
house  engaged  in  the  export  of  hardware,  machinery, 
provisions,  chemicals,  and  general  merchandise  particu- 
larly to  the  following  countries — Australia,  New  Zealand, 
South  Africa,  and  the  Far  East.  During  the  war  period 
the  business  of  the  concern  grew  very  rapidly.  During 
1919  total  sales  in  these  markets  amounted  to  over  $6,000,- 
000;  during  1921,  by  way  of  contrast,  the  business  had 
fallen  in  dollars  to  less  than  40%  of  the  record.  The  com- 
pany has  been  in  business  for  many  years.  It  has  executed 
indents  for  customers  in  the  Far  East  and  has  upon  occa- 
sion attempted  to  introduce  goods  on  its  own  account. 
Its  general  policy  lias  been  that  of  selling  unbranded 
goods  wherever  possible,  sometimes  adding  its  own 
brands.  Branded  goods  have  been  sold  only  when  there 
was  definite  order  on  the  part  of  a  customer. 


PRODUCT  POLICY  189 

The  Williams  and  Knox  Company,  in  reviewing  the 
general  situation,  has  come  to  the  conclusion  that  unless 
the  commission  house  establishes  a  good-will  of  its  o"s\ai 
and  establishes  its  own  name  in  particular  markets, 
it  will  not  be  able  to  continue  to  do  a  profitable  business. 
Two  proposals  are  being  considered.  The  first  is  that 
the  company  specialize  more  and  more  in  hardware  and 
machinery  lines  in  which  it  has  been  most  successful, 
attempting  by  concentrated  effort  over  this  broad  field  to 
secure  a  much  larger  proportion  of  the  market  for  ma- 
chinery of  various  types.  The  second  proposal  is  that 
the  company  continue  to  handle  general  merchandise 
including  both  textiles  and  foodstuifs,  but  that  it  adopt 
a  policy  of  developing  and  advertising  its  own  brands, 
purchasing  such  goods  as  it  needs  from  the  mills  upon 
specifications  labeled  mth  private  brands  of  the  Williams 
and  Knox  Company. 

Should  either  of  these  proposals  be  adopted? 


CHAPTER  V 


EXPORT   POLICIES— POLICIES   RELAT- 
ING TO  DISTRIBUTION 

THE  choice  of  policies  regarding  distribution  de- 
pends upon  a  number  of  factors.  The  type  of 
product  and  line  of  business  have  a  very  important 
bearing  upon  the  decision  as  to  channels  of  distriliution 
to  be  utilized,  because  the  external  organization  avail- 
able for  distribution  depends  in  part  upon  the  type  of 
product.  That  is,  in  the  export  of  raw  materials,  mid- 
dlemen with  slightly  different  functions  would  have  more 
to  do  with  the  distribution  of  the  product  than  if  the 
product  happened  to  be  a  manufactured  article,  possibly 
of  the  specialty  type. 

Decision  upon  policy  may  depend  likewise,  as  between 
different  manufactured  products,  upon  their  nature — 
whether  a  staple  or  a  novelty,  or  a  specialty  which  is 
comparatively  unknown  and  the  sale  of  which  depends 
upon  the  active  canvassing  of  a  market.  It  may  be 
found  that  if  the  article  is  complex — a  complicated 
machine,  for  instance — middlemen  or  the  usual  channels 
of  distribution  arc  not  suital)le,  that  in  order  to  render 
service  and  build  up  good-will  as  a  basis  for  continued 
foreign  business  it  is  necessary  to  establish  service  sta- 
tions. It  has  been  said  that  the  type  of  product  and  the 
external  organization  for  foreign  trade  are  closely  con- 
nected. It  is .  obvious  of  course  that  the  exporter  mil 
utilize  the  commercial  organization  of  international 
trade  in  so  far  as  it  is  to  his  advantage,  and  the  existence 
of  specialized  types  of  middlemen,  the  existence  of  spe- 
cial financing  agencies,  and  the  existence  of  special  facil- 
ities for  delivery  will  all  liaAc  their  bearing  upon  his 
distribution  policy. 

190 


DISTRIBUTION    POLICY  191 

Next,  the  size  and  financial  resource.s  of  llic  exi)oi-tini>- 
enterprise  will  have  an  inHuenee  upon  tlie  selection  o? 
export  methods.  \MiiIe  direct  exporting  is  by  no  means 
confined  to  large  concerns,  the  small  concern  will  not 
infrequently  find  it  advantageous  to  utilize  export  mid- 
dlemen and  to  refrain  from  any  attempt  to  reach  the 
market  direct.  On  the  other  hand,  while  the  very  large 
concern  may  often  find  it  advisable  to  estabHsh  branch 
offices^  and  even  branch  factories  in  some  foreign  coun- 
tries, it  may  be  found  to  be  good  policv  to  utilize  middle- 
men in  reaching  other  markets. 

The  personnel  of  a  business  concern  and  the  personal- 
ity of  leading  officials  will  always  have  a  modifving  infiu- 
ence  upon  general  pohcies,  because  in  export  ^operation 
as  m  so  many  other  phases  of  business  poUcy  there  is 
no  one  decision  which  can  be  said  to  be  right  to  the  exclu- 
sion of  all  other  alternatives.  The  interest  of  officials 
will  frequently  determine  whether  a  concern  shall  under- 
take direct  exporting  or  continue  to  use  middlemen. 

Lastly,  the  characteristics  of  the  markets  in  which 
export  trade  is  to  be  developed  will  have  a  very  real 
efieect  upon  the  choice  of  export  methods  and  upon  the 
determination  of  export  policies.  It  is  probable  that 
no  single  export  method  will  be  suitable  for  all  markets. 
The  reasons  for  variation  of  pohcy  between  the  Far  East 
and  the  British  Isles  are  to  be  "found  not  only  in  the 
commercial  organization  but  also  in  the  dilTerences 
between  the  two  markets.  There  is  a  common  tendency 
among  both  the  initiated  and  the  uninitiated  to  look  upon 
the  channels  of  distribution  in  foreign  trade  as  much 
more  complicated  than  those  in  domestic  trade.  That 
such  conclusion  is  not  justified  may  be  illustrated  by  the 
f ollomng  comparison  of  the  methods  of  selHng :  * 

*Cf.      The    New    England    Exporter,    bv    Ilarrv    R.    Tosdal     nublishpd 
by  the   Boston   Chamber  of  Commerce,   1922.  '  losaai,    putjii!,iied 


192    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Distributing  to  Foreign 
Buyers  : 

(1)    Sale  through  export  com- 
mission houses. 

Practically  a  domestic 
transaction,  though 
some  risk  resting  upon 
manufacturer.  Techni- 
cal details  of  exporting 
handled  by  export  com- 
mission liouse. 


Distributing     to     Domestic 
Buyers  : 

(1)   Sale  through  commission 
house  or  selling  agent. 

Purchasing  agent  as  in 
hardware  trade  or  selling 
house  as  in  textile  trade. 


(2)    Sale  to  export  merchant 
ill  the  United  States. 

To  all  intents  and  pur- 
poses, a  domestic  trans- 
action. Credit  risk  bas- 
ed upon  credit  of  ex- 
port merchant,  not  upon 
that  of  foreign  buyer. 
All  foreign  details  of 
shipping,  financing,  etc., 
handled  by  export  mer- 
chant. 


(2)    Sale  to  jol)ber  or  uhole- 
saler. 


(3)  Sale  through  manufac- 
turers' agent  specializing 
in  foreign  markets. 

Agency  agreement ;  sale 
carries  risk  varying  with 
nature  of  that  agree- 
ment. Agent  handles 
details  of  exporting, 
shipment   and   financing. 

(4)  Sale  to  importers  (deal- 
ei's)   in  foreign  country. 

Credit  risks  and  details 
of  shipment  handled  by 
exporting  manufacturer 
or  arranged  by  him.  Im- 
porter may  be  general 
importer,  wholesale  or 
retail,   or   dealer. 

(.'))  Sale  tlirougli  l)raneli 
houses  abroad  to  dealers 
or  eoiisuiners. 

Credit  risks  and  details 
of  shipment  handled  by 
exporting    manufacturer. 


(?))   Sale    through    manufac- 
turers' agent. 


(4)    Sal(>  to  jobbers  or  whole- 
salers. 


(.■))  Sale  through  branch 
house  in  domestic  mar- 
ket to  wholesalers,  retail- 
ers, or  consumers. 


DISTRIBUTION    POLICY 


193 


(7)   Sale    direct    to   retailfrs 
or  consumers. 


(S)    No  domestic  parallel. 

Laws     forbid     combina- 
tions  in   domestic   trade 


(6)  Sale  through  sales  agents  (6)   Sale     through    agencies, 
abroad.  retail    or   wholesale,    ex- 
Usual  risk    assumed    by                   elusive  or  non-exclusive. 
exporting    manufacturer, 

depending  upon  terms 
of  contract.  Agencies 
frequently  exclusive; 
sometimes  credit  risk  del 
credere. 

(7)  Sale  direct  to  retailers  or 
consumers  abroad. 

Credit  risks  and  details 
of  shipment  handled  hy 
exporting   manufacturer, 

(H)  Sale  through  export  com- 
binations to  1)  u  y  e  ]•  s 
abroad. 

Contingent  risk  on  ex- 
porting member.  Devel- 
opment of  markets,  de- 
tails of  shipments,  financ- 
ing in  hands  of  combi- 
nation officials. 

The  manufacturer  who  wishes  to  dispense  with  many 
of  the  responsibilities  and  details  of  export  business  will 
find  it  most  convenient  to  sell  through  export  houses, 
commonly  known  as  export  merchants  and  export  com- 
mission houses.  These  are  middlemen  in  foreign  trade 
corresponding  to  wholesalers,  jobbers,  or  commission 
merchants  in  domestic  trade.  The  export  merchant, 
corresponding  most  closely  to  our  wholesaler  or  jobber, 
purchases  goods  outright,  pays  for  them,  and  there  the 
transaction  may  end  for  the  manufacturer.  The  export 
house  should  consist  of  an  organization  which  under- 
stands every  branch  of  business  abroad.  Just  as  in 
domestic  houses  some  specialize  in  dry  goods,  groceries, 
or  other  products,  so  the  export  commission  house  is  apt 
to  be  a  specialist.  Very  small  houses  must  specialize; 
very  large  houses  are  able  to  handle  many  lines,  because 
of  size.  The  export  merchant,  like  the  domestic  whole- 
saler, buys  where  he  can  to  the  best  advantage  and  sells 
in  markets  that  he  has  developed  for  the  best  prices  that 
he  can  get.  He  endeavors  to  build  up  good-will  for  his 
house,  but  it  is  evident  that  he  can  do  this  successfully 


194    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

only  if  he  specializes  either  in  products  handled  or  in 
market  exploited.  Export  merchants  have  usually  estab- 
lished branch  offices  or  close  affiliations  in  the  foreign 
sections  in  which  their  business  is  developed.  In  this 
respect  their  organization  is  very  much  the  same  as  that 
of  the  manufacturer  who  exports  direct  on  a  large  scale. 
The  export  house  usually  does  not  restrict  itself  to 
products  of  its  own  country,  but  aims  to  sell  in  certain 
territories  regardless  of  the  origin  of  wares  required  for 
those  territories.  On  that  account  an  export  house  may 
distribute  foreign  goods  as  well  as  those  produced  at  home. 
The  export  merchant  has  been  very  important  in  the 
development  of  German  trade,  and  there  is  a  tendency 
to  combine  bankin.g  with  merchant  functions  in  both 
Germany  and  England.  In  the  American  market,  how- 
ever, the  export  merchant  is  not  so  important  as  the 
export  commission  house.  Theoretically  at  least,  the 
export  merchant  buys  and  sells  on  his  own  account, 
while  the  export  commission  merchant  buys  and  sells  for 
the  account  of  the  buyer.  Practically,  there  has  been 
confusion  of  functions,  and  export  commission  merchants 
will  frequently  buy  and  sell  on  their  own  account. 

Much  more  important  in  the  foreign  trade  of  the 
United  States  is  the  export  commission  house,  which 
was  originally  organized  to  execute  orders  in  a  country 
for  foreign  importers.  In  other  words,  the  commission 
house  was  originally  organized  to  execute  orders  of 
buyers  and  was  the  buyers'  agent,  income  being  received 
from  commissions  paid  b}^  buyers.  The  organization 
developed  was  much  like  that  of  the  export  merchant, 
having  branch  offices  established  in  various  cities  and 
abroad.  Likewise  in  specializing,  the  commission  house 
is  similar  to  the  export  merchant.  There  is  specialization 
according  to  products  handled,  also  according  to  markets. 
At  the  outset,  commission  houses  got  orders  from  foreign 
buyers  through  correspondence,  salesmen,  or  advertis- 
ing. These  orders,  or  indents  as  the)'  were  called,  would 
be  transmitted  to  mnnufacturiTs  after  bids  had  been 
received    from    competing    manufacturers.      AVlieu    the 


DISTRIBUTION    POLICY  195 

orders  were  shipped,  payment  was  made  or  credit  risk 
assumed  by  tlie  commission  house. 

There  has  been  a  tendency  for  exj)ort  commission 
houses  to  develox3  along  other  lines.  Many  of  them 
undertake  to  buy  commodities  from  foreign  markets  and 
sell  in  the  United  States  and  to  act  as  merchants'  agents 
for  American  manufactures  in  foreign  countries,  thus 
departing  from  conmiission  practice.  Since  a  manufac- 
turer who  develops  his  foreign  trade  to  satisfactory 
volume  usually  desires  direct  contact  with  foreign 
buyers,  there  is  a  tendency  for  the  field  of  the  export 
merchant  and  the  exjjort  commission  house  to  be 
restricted.  As  a  consequence  they  have  taken  on  new 
commodities  and  new  functions  in  their  position  as 
agents  for  American  manufacturers. 

From  the  point  of  view  of  the  manufacturer  who 
desires  to  enter  foreign  trade,  the  export  commission 
house  offers  much  the  same  advantages  as  the  export 
merchant  in  that  the  commission  house  assumes  all  the 
routine  of  shipment  and  collection,  frequently  guaran- 
teeing credits  or  paying  cash  for  the  goods.  Technically 
the  export  commission  house  is  the  agent  of  the  buyer, 
but  frequently  there  has  developed  the  practice  of  col- 
lecting commissioris  from  both  buyer  and  seller.  Ethi- 
cally this  is  not  good  practice,  but  so  long  as  the  interests 
of  both  parties  are  reasonably  protected  it  will  persist. 
It  is  evident  that  both  experienced  and  inexperienced 
exporters  can  get  best  service  from  an  export  merchant 
or  commission  house  only  when  the  markets  in  which  the 
house  is  best  represented  and  the  lines  handled  are 
known.  If  specialization  is  according  to  the  lines  handled 
by  a  particular  manufacturer  in  markets  he  desires  to 
reach,  he  may  find  it  to  his  advantage  to  utilize  these 
middlemen.  Ordinarily  such  middlemen  are  not  to  be 
regarded  as  the  most  effective  means  of  exploiting  a 
new  product  or  a  new  market.  New  goods  of  the  type 
of  specialties,  to  the  use  of  which  foreign  buyers  must 
be  educated,  are  usually  handled  by  the  export  merchant 
or  commission  house  as  they  would  be  handled  by  the 
local  jobber  or  wholesaler  in  the  domestic  market.    Just 


196    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

as  the  manufacturer  cannot  ordinarily  expect  the  domes- 
tic jobber  or  wholesaler  to  push  his  lines  to  the  exclusion 
of  other  lines  when  he  handles  a  variety  of  goods,  so  he 
cannot  expect  the  export  commission  house  to  push  goods 
to  the  exclusion  of  others.  At  "best  special  arrangements 
may  be  made,  but  promotion  work  should  be  entrusted  to 
the  care  of  such  houses  only  with  clear  understanding 
on  both  sides. 

In  so  far  as  the  export  house  handles  competing  lines 
or  engages  to  represent  competing  manufacturers,  there 
is  always  danger  that  one  or  the  other  may  be  neglected. 
In  selling  to  the  export  merchant  oi-  commission  house, 
the  manufacturer  should  determine  in  what  markets  the 
export  merchant  is  best  lifted  to  sell;  and,  if  it  is  decided 
to  grant  an  exclusive  agency,  territory  slnuild  be  care- 
fully defined  so  as  not  to  limit  future  development. 
Granting  exclusive  rights  for  too  wide  a  territory  hinders 
future  development.  Obviously  no  house  can  adequately 
represent  the  manufacturer  in  a  wide  zone  including 
China,  Japan,  India,  Dutch  East  Indies,  and  the  South- 
ern Pacific  when  distances  are  reckoned  in  thousands  of 
miles  and  population  in  hundreds  of  millions. 

Although  these  export  middlemen  offer  particular 
advantages  to  the  exporter  with  small  resources,  the 
services  performed  are  frequently  of  value  even  to  very 
large  concerns  having  their  own  selling  organizations 
abroad.  The  United  States  Steel  Corporation  and  other 
large  exporting  concerns  make  use  of  exijort  commission 
houses  in  certain  markets,  which  their  own  organizations 
are  not  able  to  reach  so  efi"ectively.  From  the  view-point 
of  the  buyer,  services  performed  are  much  the  same  as 
those  of  jobbers.  They  enable  the  foreign  buyer  to 
purchase  expeditiously  in  various  markets  without  hav- 
ing to  attend  to  many  details,  which  would  be  necessary 
without  the  intervention  of  these  agencies.  Commission 
houses  perform  a  necessary  service  and  are  used  very 
widely  in  this  country.  In  a  general  way,  we  may  say 
that  exporters  in  this  country  tend  to  use  export  mer- 
chants and  commission  houses  to  a  very  large  extent  in 
dealing  with  Asia  nnd  tlu>  Far  East.     In  Australia  and 


DLSTRIBLTIOX    POLICY  197 

in  South  Africa,  sales  are  almost  entirely  in  the  hands 
of  commission  houses.  In  South  America  our  export 
houses  do  a  large  business,  although  more  is  being  sold 
direct  as  the  volume  of  business  increases  sufficiently  to 
warrant  it  for  indixidual  concerns.  Generally  speaking, 
our  trade  with  Mexico  and  Canada  is  handled  direct.  The 
commission  charged  by  houses  varies  from  1%  to  87c, 
depending  upon  the  type  of  goods,  the  number  of  items, 
the  risk  involved,  and  the  detail  involved  in  making  up 
shipments.  The  general  tendency  is  for  the  exporter  to 
reach  his  markets  dii'ect  as  soon  as  his  business  warrants 
the  expense.  Just  as  the  manufacturer  tends  to  go  direct 
to  wholesaler  or  retailer  or  even  consumer  in  domestic 
trade  in  order  to  secure  greater  control  over  the  ultimate 
demand,  so  in  foreign  trade  that  house  which  is  closest 
to  the  ultimate  buyer  has  the  strongest  hold  upon  its 
trade.  In  many  other  respects  the  parallel  might  be 
drawn  between  direct  exporting  and  the  movement 
toward  more  direct  domestic  sale,  toward  passing  over 
middlemen  to  get  nearer  to  the  consumer. 

The  major  question  of  policy  is  one  which  is  frequently 
decided  by  the  administration;  namely,  whether  the  con- 
cern should  export  directly  to  buyers  in  foreign  countries 
or  make  contacts  with  foreigners  indirectly  through  mid- 
dlemen in  this  country.  If  a  manufacturer  has  decided 
to  export  direct,  it  is  assumed  that  he  is  prepared  to 
undertake  all  the  responsibilities  of  that  decision.  He 
must  build  his  own  export  organization,  analyze  markets, 
exploit  territories,  pass  judgment  upon  credit  informa- 
tion, and  make  his  shipments  and  collections  as  he  would 
in  domestic  trade.  By  so  doing,  he  may  save  a  portion 
of  the  middleman's  i)rotits,  but  the  chief  advantage  from 
direct  exporting  is  the  opportunity  he  secures  to  build 
up  good-will  directly  for  his  firm  and  his  product.  Direct 
sale  to  foreign  buyers  involves  more  expense  to  the 
manufacturer  than  sale  through  middlemen.  It  requires 
a  larger  organization,  and  as  in  domestic  sale  the  size 
of  that  organization  depends  upon  various  factors. 
Nevertheless,  whether  or  not  foreign  trade  is  profitable 
depends  upon  the  usual  market  considerations  of  volume, 


198    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

trade  possibilities,  capital  available  for  development, 
and  proper  management ;  not  upon  the  choice  of  direct  or 
indirect  exporting  methods.  In  direct  exporting,  organ- 
ization and  management  is  one  of  the  first  problems. 
The  inexperienced  exporter,  if  he  has  determined  upon 
direct  exporting,  must  then  decide  to  what  extent  he  will 
build  up  his  home  organization.  Two  choices  are  open: 
first,  the  modest  policy  of  "pay  as  you  go,"  the  policy  of 
slow  but  sound  development ;  and,  secondly,  the  policy  of 
thorough  equipment  and  comparatively  large  organiza- 
tion, in  other  words  making  a  splurge  in  the  hope  that 
quick  development  will  compensate  for  the  initial 
expense. 

In  the  following  outline  are  indicated  some  of  the 
problems  which  must  be  met,  in  deciding  upon  both  the 
general  policy  of  distribution  and  the  detailed  problems 
in  carrying  out  a  policy  of  direct  distribution  in  foreign 
markets : 

A.  Policies  Regarding  Channels  of  Distribution  : 

1.  Indirect  versus  direct  methods. 

Shall  the  small  concern  attempt  direct  exporting-  or  shall 
it  rely  upon  indirect  methods! 

Under  what  conditions  shall  concerns  which  export  di- 
rect in  some  markets  export  through  middlemen  in 
others  ? 

For  what  types  of  goods  are  indirect  methods  especially 
fitted  ? 

Do  specialties  or  novelties  always  call  for  direct  methods 
of  export? 

2.  Sale  through  export  commission  houses  and  export  mer- 
chants in  the  United  States. 

What  are  the  functions  of  export  commission  houses? 
Of  export  merchants? 

Under  what  circumstances  can  export  commission  houses 
and  export  mcrch.inis  be  Uf^ed  advantageously  by  a  manu- 
facturer seeking  to  develop  a  foreign  market  for  his 
goods? 


DISTRIBUTION   POLICY  199 

"What  precautions  should  be  taken  so  that  the  develop- 
ment of  the  manufacturer's  foreign  business  shall  not  be 
ham])ered  ? 

What  should  be  the  attitude  aud  policy  of  export  com- 
mission liouses  and  export  merchants  toward  manufac- 
turei's  ? 

Should  export  middlemen  undertake  to  push  the  goods 
of  any  one  manufacturer? 

3.  Sale  through  manufacturer's  agent  or  combination  export 
manager. 

Under  what  conditions  can  the  manufacturer's  agent 
serve  the  manufacturer  better  than  can  the  export 
commission  house  ? 

What  are  the  advantages  of  the  combination  export  man- 
ager ?    What  are  the  weaknesses  ? 

4.  Sale  to  importers  or  dealers  in  foreign  countries. 

Under  what  conditions  is  it  wise  to  sell  to  dealers  in  for- 
eign countries  without  establishing  agencies? 

Ts  such  a  plan  suitable  for  goods  which  require  unusual 
sales  ettbrt? 

In  what  respect  does  the  policy  of  sale  through  dealers 
abroad  diifer  from  the  domestic  policy  of  sale  through 
dealers  ? 

5.  Sale  through  branch  houses  abroad  to  dealers  or  consumers. 

Under  what  conditions  is  it  advisable  to  establish  branch 
houses  ? 

Should  branches  be  treated  as  semi-independent  units  of 
an  organization  or  should  they  be  closely  controlled? 

Should  branches  carry  stock? 

Should  branches  be  manned  by  native  or  American  per- 
sonnel ? 

6.  Sale  through  sales  agents  abroad. 

Under  what  conditions  is  it  wise  to  appoint  agents? 


200    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

7.  Sale  direct  to  retailers  or  consumers  abroad. 

When  is  it  wise  to  sell  direct  to  retailers  or  even  to 
consumers  abroad '? 

What  are  the  advantages  and  disadvantages  of  such 
methods  for  products  for  which  an  organization  of  mid- 
dlemen may  be  utilized  ? 

8.  Sale  through  export  combinations  to  buyers  abroad. 

When  is  it  advisable  to  join  an  export  combination  in 
order  to  develop  foreign  sales? 

What  is  the  nature  of  a  desirable  export  combination 
from  the  view-point  of  a.memlier  manufacturer? 

What  should  be  the  form  of  such  a  combination? 

Should  the  policy  of  such  a  combination  diifer  materially 
from  the  policy  of  the  individual  large  manufacturer  in 
exporting  to  foreign  markets? 

B.  Policy  Relating  to  Dealers  and  Agents: 

1.  Exclusive  agents. 

Under  what  conditions  sliould  a  company  grant  exclusive 
agencies  ? 

How  is  the  territory  to  be  granted  to  an  agency  to  l)e 
determined  ? 

2.  Attitude  toward  dealers — dealer  helps. 

To  what  extent  should  the  manufacturer  attempt  to  help 
foreign  dealers  to  resell  goods'? 

How  should  a  policy  of  dealer  aid  be  carried  out? 

Should  a  defniite  plan  of  cooperation  be  included  in  the 
agency  contract  ? 

3.  Agency  contracts. 

Sliould  contracts  be  used? 

What  should  be  the  provisions  of  an  agency  contract? 


DISTRIBUTIOX   POLICY  201 

■1.  Wholesale  and  retail  agencies. 

Under  Avliat  conditions  may  it  be  advisable  to  give  the  ex- 
clusive agency  for  goods  to  a  wholesaler  who  is  also  a  re- 
tailer? 

Under  what  conditions  may  the  operation  of  a  retail  es- 
tablishment narrow  the  field  for  the  sale  of  a  product  ? 

5.  Attitude  toward  newer  types  of  retailers. 

What  should  be  the  attitude  of  the  manufacturer  toward 
sale  to  department  store,  cooperative  societies,  chain 
stores,  and  mail-order  concerns  as  they  exist  in  countries 
outside  of  the  United  States  ? 

Should  a  concern  which  lias  adopted  the  general  policy 
of  selling  only  to  wholesalers  sell  to  a  large  department 
store  in  a  South  American  or  Chinese  city! 


Problem  45 

The  Twitchell  Company — Commission  House  versus 
Own  Salesmen"" 

Although  its  relations  with  commission  houses  have 
been  fairly  satisfactory,  the  Twitchell  Company  is  con- 
sidering the  establishment  of  its  own  foreign  salesforce. 
For  over  thirty  years  this  company  has  been  manufac- 
turing pipe  unions,  valves,  and  fittings,  and  has  been 
handling  its  export  business  through  commission  houses 
in  New"  York  City.  Its  total  yearly  business  in  foreign 
countries  has  now  reached  $940,000,  which  is  roughly 
one-seventh  of  its  total  sales  volume.  Several  com- 
panies with  this  amount  of  foreign  business  are  dis- 
tributing their  products  through  their  salesforces.  These 
firms  maintain  that  they  have  received  many  advantages 
from  handling  their  own  exports  direct. 

*0n  export  mcrcliants  aud  export  commission  houses,  their  services,  their 
advaiitiigos  and  disadvantages,  see  the  following:  Dudeney,  The  Exporter's 
Handbook  and  Glossary,  Chap.  VII;  Ford,  The  Foreiqn  Trade  of  the  United 
States,  Chap.  VII;  Hough,  Practical  Exporting,  Chap.  VIII;  E.  B.  Fil 
singer  (Irving  National  Bank),  Trading  tcith  Latin  America,  pages  70-77; 
Preoiado,  Exporting  to  the  World.  Chap.  VIIT;  A'edder,  American  Methods 


202    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

By  dealing  through  a  commission  house,  which  main- 
tains a  hirge  salesforce  located  in  several  important  for- 
eign centers,  the  Twitchell  Company  has  experienced 
many  advantages.  A  broad  distribution  has  been  secured 
for  its  product  and  a  more  stable  volume  of  sales.  When 
the  market  in  the  Argentine  slumped  a  few  years  ago 
and  there  was  no  demand  for  pipe  tittings,  additional 
pressure  was  brought  to  bear  on  the  commission  house 
salesmen  in  other  countries,  and  as  a  result  approxi- 
mately the  same  amount  of  export  trade  was  maintained. 
With  its  large  salesforce  such  a  house  was  able  to  take 
care  of  dumping  after  a  surplus  had  been  built  up  in 
this  country. 

Because  of  its  specialization  and  experience  in  the  for- 
eign field  the  commission  house  has  been  in  a  position 
to  give  the  Twitchell  Company  advice  in  regard  to  export. 
By  having  its  salesmen  on  the  ground  the  commission 
house  has  also  been  in  position  to  extend  credit,  make 
collections,  and  arrange  for  adjustments.  Since  it  is 
familiar  with  the  technicalities  of  the  law  in  the  various 
foreign  countries,  it  has  readily  taken  care  of  the  billing 
and  shipping  of  the  goods.    The  manufacturer  was  thus 

in  Foreign  Trade,  Chap.  IV;  Wolfe,  Theory  and  Practice  of  International 
Commerce,  Chaps.  Ill  &  IV;  Kidd,  Eidd  on  Foreign  Trade,  pages  344-348; 
Hellauer,  TVelthandeJslehre,  paragraphs  30-58;  Bacher,  (Business  Training 
Corporation),  Export  Technique,  Chap.  V;  Richards  (Business  Training 
Corporation),  The  Export  Commission  House  (Part  II  of  Export  Houses)  ; 
Fowler  (Business  Training  Corporation),  Export  Houses  (Part  I  of  The 
Export  Merchant)  ;   also  tlie  following  periodical  references: 

Proceedings  of  annual  conventions  of  National  Foreign  Trade  Council: 

1914,  p.  150,  George  L.  Duval— "The  Eelation  of  the  Merchant 
to   Import  and   Export   Trade. ' ' 

1921,  p.  472,  F.  W.  Lincoln— "The  Service  of  the  Export  Com- 
mission House  and  Its  Relation  to  the  Exporting  Manufacturer. ' ' 

1921,  p.  476,  Wm.  E.  Peck — "Service  of  the  Export  Commission 
House  with  special  reference  to  Financing  Shipments  and  Han- 
dling Documents. ' ' 

1921,  p.  483,  A.  C.  Callan — "Service  Rendered  on  the  Pacific 
Coast. ' ' 

Export  Trade  4'  Exporters'  Review. 

Mar.    26,    1921,    p.    .5 — "Where    the    Commission    House    Aids    the 

Exporter. ' ' 
Apr.  29,  1922,  p.  8 — "The  Continued  Importance  of  the  Commission 
House. ' ' 

The   World's  MarTcets. 

June  1921,  p.  25— "The  Export  Commission  House." 


DISTRIBUTION   POLICY  203 

relieved  of  most  of  the  bother  and  complications  devel- 
oping from  the  handling  of  a  foreign  business,  and  has 
been  able  to  devote  himself  exclusively  to  manufacture 
and  domestic  selling.  In  fact,  in  handling  its  export 
trade  the  Twitchell  Company  in  the  past  has  been  able 
to  sell  its  merchandise  on  domestic  orders  to  the  com- 
mission house,  receiving  its  money  as  soon  as  the  goods 
arrive  in  Xew  York,  and  leaving  the  commission  house 
to  handle  the  actual  exporting  of  the  goods. 

By  having  its  salesmen  distribute  several  lines  of  mer- 
chandise the  commission  house  is  frequently  able  to 
operate  at  a  lower  selling  expense  than  is  the  manufac- 
turer whose  salesmen  usually  handle  but  one  line  of 
goods.  This  is  particularly  true  of  a  "short  line,"  where 
a  manufacturer  produces  only  a  limited  number  of  sizes 
and  styles.  To  avoid  this  difficulty  some  manufacturers 
have  been  able  to  secure  contracts  to  handle  allied  lines 
through  their  own  salesmen,  thus  obtaining  some  of  the 
advantages  of  the  commission  house.  Although  the 
Twitchell  C^ompany  would  not  have  the  difficulties  of  a 
"short  line"  manufacture,  still  if  it  establishes  its  owii 
foreign  sales  organization  it  would  in  all  probability 
have  a  high  salesforce  expense,  since  up  to  the  pre.^ent 
time  it  has  not  found  any  manufacturers  of  allied  lines 
who  are  willing  to  make  arrangements  to  distribute  their 
products  through  the  Twitchell  Company's  salesmen. 

The  managers  have  found,  however,  several  disadvan- 
tages in  handling  an  export  business  through  commission 
houses.  In  the  first  place  such  a  commission  house  has 
not  built  up  a  permanent  business  for  the  manufacturer, 
since  its  purpose  has  been  to  sell  merchandise  and  its 
salesmen  have  not  concentrated  on  any  particular  brand 
of  goods.  Furthermore,  by  dealing  through  a  commis- 
sion house  foreign  buyers  do  not  become  acquainted  mtli 
the  manufacturing  company.  They  are  not  familiar  ^\dth 
its  policies,  neither  do  they  receive  the  same  service  that 
would  be  rendered  by  the  company's  own  salesmen. 

By  selecting  its  own  salesmen  the  Twitchell  Company 
would  assure  itself  of  satisfactory  representatives.  The 
firm  would  also  be  able  to  control  its  salesmen  in  the 


204    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

field  and  to  hold  them  up  to  a  proper  standard  of  ser\ace 
that  is  to  be  rendered  to  its  customers.  Many  foreign 
buyers  prefer  to  deal  direct  with  the  manufacturing  com- 
pany rather  than  through  a  third  party,  since  they  are 
often  able  to  secure  adjustments  and  straighten  out  mis- 
understandings with  less  trouble.  Direct  dealing  also 
builds  up  friendship  between  the  foreign  buyer  and  man- 
ufacturer, which  is  frequently  the  basis  for  future 
business. 

By  establishing  its  own  salesforce,  however,  the 
Twitchell  Company  will  reduce  its  profit  on  its  foreign 
trade  to  less  than  half  what  it  is  realizing  at  the  present 
time.  Furthermore,  the  company  will  be  able  to  establish 
its  salesmen  only  in  such  cities  as  Buenos  Aires,  Eio  do 
Janeiro,  and  Mexico  City  in  Latin  America;  Milan,  Paris, 
Brussels,  Hamburg,  and  Copenhagen  in  Europe ;  whereas, 
the  commission  house  which  is  handling  the  company's 
product  at  the  present  time  covers  a  greater  number 
of  cities  in  both  South  America  and  Europe  as  well  as 
in  the  Orient. 

Would  it  be  advisable  for  the  Twitchell  (\)ni])aiiy  to 
establish  its  own  foreign  salesforce!* 

*Professor  Hellauer,  in  liis  Wdtshandelslehre,  gives  a  careful  analysis 
of  the  commercial  organization  in  export  and  import  trade.  He  classifies 
exporters  as  exporters  in  the  wider  sense  and  exporters  in  the  narroAver 
sense.  In  the  former  he  includes  all  those  who  undertake  export  trans- 
actions. In  the  latter  lie  includes  those  whose  chief  business  is  exporting. 
Houses  whose  chief  l)usiness  is  exporting  are  called  general  exporters 
and  they  operate  either  on  a  commission  or  a  merchant  basis.  The 
producer  who  wishes  to  export  his  wares  may  carry  pn  export  business 
himself  or  through  commission  men  or  commissionaires ;  that  is,  so- 
called  "indirect  export."  The  manufacturer  appears  to  be  better  fitted 
than  the  agriculturist  to  carry  on  independent  export  operation,  although 
even  here  direct  export  varies  according  to  the  markets  in  which  export 
is  carried  on.  Three  groups  of  countries  may  be  distinguished  for  this 
purpose.  The  first  group  includes  several  of  the  European  countries  where 
business  transactions  offer  hardly  greater  difficulties  tlian  domestic  trade'; 
these  are  the  industrially  developed  west  and  central  European  countries. 
Manufacturers  are  accustomed  to  cultivate  the  industrial  states  of  Europe 
direct.  The  second  group  is  formed  by  the  northeastern  and  southern 
Huropean  countries,  also  the  Levant  and  the  U.  S.  A.  Here  manufac- 
turers often  utilize  direct  methods,  but  side  by  side  there  are  utilized  to  an 
important  extent  the  services  of  export  houses,  even  though  there  are  differ- 
ences between  markets.  While  German  maiuifacturers  operate  on  a  direct 
basis  in  the  northeastern  European  states — Norway,  Sweden,  Denmark,  and 
Kussia  and   even  in  the  United   States  to  an   important   degree — Austrian 

'It  mu,st  be  remembered  that  this  is  from  the  German  view-point. 


DISTRIBUTION   POLICY  205 

Problem  46 
The  Mills  and  Marks  Company — Distribution   Policy 

The  Mills  and  Marks  Company  handles  the  output  of 
several  mills  and  markets  cotton  piece  goods  of  various 
kinds  including  grey  or  unbleached  cloths,  bleached  cloths 

inaniifacturers  do  this  to  a  nmc-h  smaller  extent.  On  the  other  hand,  the 
Levant  trade  is  ■worked  by  Austrian  manufafturers  much  more  on  a  direct 
basis  than  by  German.  To  the  third  group  of  countries  belong  those  which 
might  be  called  overseas.  This  is  the  domain  of  the  export  house.  Only 
by  those  manufacturers  who  are  able  to  bring  about  a  large  volume  of  sales 
in  each  overseas  area  can  direct  export  be  carried  on,  while  other  manufac- 
turers and  those  who  can  never  expect  to  have  a  large  sale  must  depend  upon 
export  houses.  The  rule  is  that  the  cultivation  of  oversea  business  is  left  to 
tlie  exporter  in  tlie  narrower  sense.  The  manufacturers  of  the  United  States 
are  in  much  the  same  position  as  European  manufacturers  in  that  in  earlier 
times  the  export  business  was  carried  on  chiefly  indirectly  through  New 
York.  Today,  however,  in  all  markets  in  which  they  have  achieved  larger 
important  outlets  they  work  direct.  Only  a  large  volume  of  sales  permits 
the  producer  to  establish  an  independent  commercial  organization  to  develop 
his  export  business ;  on  that  account,  medium  and  small  manufacturers  are 
very  dependent  upon  the  mediation  of  middlemen.  In  summarizing  the  ad- 
vantages and  disadvantages  of  direct  and  indirect  export,  Professor  Hellauer 
l)rings  out  the  following: 

Advantages   of   Indirect   Export : 

1.  The  manufacturer  is  relieved  of  the  work  and  care  of  the  export 
operation. 

2.  The  manufacturer  needs  less  capital  than  to  carry  on  direct  busi- 
ness. 

3.  The  risk  for  the  manufacturer  is  less  than  in  direct  export. 

4.  The  manufacturer  may  specialize  in  production,  leaving  export  sale 
to  export  house. 

5.  The  merchandising  operations  of  the  export  house  may  be  carried 
on  more  cheaply,  intensively,  with  smaller  risk  and  with  greater 
enterprise  than  that  of  the  manufacturer  for  several  reasons. 
Branches  and  travelers  may  be  maintained  more  cheaply  and  more 
efficiently  than  by  the  individual  concern.  They  may  extend  their 
organif.ation  because  of  combinations  of  sales  of  a  number  of  arti- 
cles, and  branches  may  be  maintained  in  places  where  the  sales  of 
a  single  one  would  not  permit  them.  Risks  are  scattered  over  a 
number  of  different  products  and  markets. 

The    Disadvantages    of    Indirect    Export    Mentioned    by    Hellauer    Are    as 
Follows : 

1.  Increase  in  the  price  of  wares  due  to  middlemen's  profits  or  com- 
missions; therefore,  the  narrowing  of  the  potential  market  or  the 
decrease  of  the  profit  of  the  producer. 

2.  The  lack  of  interest  of  the  export  house  in  any  particular  article. 

3.  The  lack  of  specialized  knowledge  relating  to  any  particular  article. 

The  advantages  and  disadvantages  of  direct  export  follow  logically  from 
what  has  been  said  about  indirect  export. 


206    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

such  as  muslins,  naiusooks,  and  sliii^tings,  printed  cloths 
of  various  kinds,  and  colored  cloths  such  as  ginghams, 
velveteens,  khakis,  corduroys,  and  fustians.  When  an 
export  department  was  organized  in  1918,  its  attention 
was  directed  toward  Porto  Rico,  Hawaii,  and  the 
Philippines  because  it  has  been  urged  that  those  markets 
offer  special  advantages  in  the  way  of  a  reduced  tariff. 
The  problem  before  the  concern  is  twofold — first,  to 
determine  whether  products  manufactured  by  the  house 
are  of  the  kind  required  by  these  markets;  and  secondly, 
to  determine  how  these  markets  should  be  reached  in 
case  the  products  are  suitable.  In  a  report  which  has 
been  made  by  its  special  investigator,  the  following  state- 
ments are  made  concerning  the  Philippine  market: 

"In  the  calendar  year  1916  the  United  States  imported  into 
the  Philippine  Islands  cotton  mannfactures  valned  at  $6,192,002, 
nearly  $2,000,000  less  than  the  previous  year  but  slightly  more 
than  in  1914.  Cotton  piece  goods  formed  about  four-fifths  of 
the  value  of  these  imports  in  1916  and  1914,  and  nearly  seven- 
eighths  in  1915. 

''The  most  important  competitor  of  the  United  States  is  the 
United  Kingdom,  whose  exports  of  cloth  to  the  Philippines 
amount  to  about  one-tenth  those  of  the  LTnited  States  and  cover 
the  same  general  classes  of  cloth,  though  the  strongest  competi- 
tion is  in  bleached  and  dyed  goods.  China,  Japan,  Switzerland, 
Italy,  Spain  and  Germany  all  have  a  share  of  the  business. 

"A  small  amount  of  competition  results  from  the  presence  of 
a  cotton  mill  in  Manila.  It  is  operated  by  Englishmen  and  is 
controlled  by  an  English  importing  house  in  Manila.  In  1905, 
the  latest  year  for  which  information  regarding  it  is  available, 
it  had  70,000  spindles  and  220  looms.  The  mill  employs  native 
help  which,  though  unsatisfactory  in  many  ways,  is  cheap  and 
willing  to  work  long  hours  when  it  is  willing  to  work  at  all.  The 
product  of  the  looms  is  chiefly  coarse  white  shirtings,  with  some 
convict  stripes  and  some  chambray. 

"The  cotton  cloths  in  greatest  demand  are  white  shirtings, 
white  drills,  betilles,  or  Swiss  muslins,  and  prints.  Probably  the 
most  impoi'tajit  single  item  imported  is  white  shirtings,  which  are 
used  by  tlu^  Jiatives  for  clothing,  many  men  wearing  no  other 
kind  of  cloth.  Not  oidy  are  shirts,  trousers  and  underwear  made 
from  it,  but  it  is  used  for  sheets,  pillow-cases,  and  other  household 
purposes.  The  heavily  sized  goods  desired  in  many  markets  are 
not  required  here,  and  a  large  variety  of  constructions,  widths, 


DISTRIBUTION   POLICY 


207 


and  lengths  are  to  be  found.  The  following  table  gives  some 
indication  of  the  character  of  the  white  shirtings  sold  in  this 
market : 

Width 
(inches) 

23i/> 

24 

31 

34 

34 

341/2 

35 

35 

35 

351/2 

36       . 

36 

77 

"Other  white  goods  of  plain  weave  for  which  there  is  a  con- 
siderable demand  are  nainsooks  and  lawns.  The  usual  type  of  the 
former  is  30  or  31  inches  wide,  of  108x96  construction,  and  18 
yards  to  the  piece.  Typical  lawns  are  shown  by  the  following 
table : 


Construction 

Lengtl 

(yards) 

72x60 

35 

72x60 

35 

56x48 

36 

68x68 

36 

72x56 

(40  varas)  36i/> 

68x60 

(40  varas)  361/" 

72x56 

36 

80x80 

(40  varas)  36i/. 

68x60 

(40  varas)  361/. 

64x64 

(40  varas)  36i/. 

76x68 

36 

76x76 

40 

56x48 

20 

Width 

Construction 

Leng 

(inches) 
29 

60x56 

10  varas 

25 

68x68 

10  varas 

24) 
Victoria  25) 
Lawns    ) 

92x92) 
92x84) 

80x72) 

(10  varas 

( 
( 

"Indian  lawns  of  fine  construction,  30  inches  wide,  and  24 
yards  long,  are  on  the  market.  The  finest,  however,  are  the 
Persian  lawns,  32  inches  wide,  and  24  yards  long.  The  weights 
of  the  lawns  vary  from  10  yards  to  16  yards  to  the  pound. 

"White  drills  for  men's  suits  are  an  important  item  of  im- 
port, men  in  the  cities  (both  native  and  foreign-born)  wearing 
clothing  of  such  goods  the  year  'round.  The  most  popular  drill 
is  not  the  usual  twill,  but  a  satin  weave.  Cloths  of  different 
widths  and  lengths  are  found,  though  the  regular  width  for 
such  goods  is  24  or  25  inches,  the  length  30  vards.  Construc- 
tions vary  from  96  by  80  to  140  by  80. 

"Khaki  drills  of  the  regular  three-harness  type  are  used  by 
the  army,  and  to  a  considerable  extent  by  civilians  for  rough 
wear.  Several  kinds  and  grades  are  in  use,  the  most  usual  being 
28  inches  wide  and  30  yards  long,  of  68x52  construction  and 


208    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

weifi'liing"  3.1  yards  to  the  pound.  Other  cloths  range  in  weight 
to  as  much  as  1.6  yards  to  the  pound,  and  in  construction  to  as 
high  as  92x56. 

"White  cotton  duck  is  used  to  considerable  extent  for  men's 
clothing,  the  usual  grade  being  28  inches  wide,  30  yards  long, 
7  ounces  to  the  yard,  and  of  i)6x72  construction.  Coarser  and 
heavier  ducks  are  used  for  tents,  awnings,  and  sails. 

"One  of  the  largest  items  in  the  imports  of  cotton  cloths  is 
lietilles,  originally  entirely  from  Switzerland  but  now  to  a  con- 
sidera])le  extent  from  England.  Betilles  is  a  coarse  muslin, 
with  a  certain  amount  of  open  work,  and  is  used  by  the  women 
for  waists  and  scarves.  A  typical  construction  is  44x32.  iSome 
of  the  betilles  are  printed,  most  of  these  coming  from  England, 
The  regular  betilles  are  104  centimeters  (about  41  inches)  wide, 
by  5  varas  (4%  yards)  long.  They  are  never  sold  by  the  yard, 
but  only  in  these  small  pieces.  Since  there  is  no  clemand  for 
such  goods  in  this  country,  American  mills  do  not  make  them. 
In  entering  the  Philippine  market,  the  X  Company  should  de- 
termine whether  one  of  its  mills  could  not  profitably  make  cloths 
of  this  type  to  compete  with  the  English  and  Swiss  betilles. 

"For  many  years  the  United  States  has  been  the  principal 
source  of  supply  for  cotton  prints  for  the  Philippines.  A  great 
variety  of  kinds  of  cloth  are  printed,  including  T-cloths,  shirt- 
ings, drills,  lawns,  muslins,  cambrics,  flannels,  crepes,  sateens, 
i-epps,  lenos,  calicos,  and  many  others,  some,  such  as  T-cloths,  not 
being  made  by  the  mills  of  this  country.  Printed  shirtings  prob- 
ably form  the  bulk  of  these  imports.  These  cloths  range  from 
those  27.6  inches  wide  of  52x40  construction  made  in  England 
to  those  30  inches  wide  of  112x112  construction  which  come 
from  France.  A  large  variety  of  colors  and  patterns  is  to  be 
seen,  red  and  blue  being  perhaps  the  most  popular  colors.  Tur- 
kej^  red  shirtings,  dyed  in  the  piece,  are  very  widely  used  by  the 
P^ilipinos.  A  much-liked  combination  is  a  red  shirt — which  is 
not  tucked  in  the  trousers  but  is  worn  outside — with  white 
trousers.  The  reverse  of  this  is  also  worn.  These  cloths  are 
usually  28  inches  wide  with  an-  average  construction  of  56x44. 

"Ginghams  of  various  colors  and  patterns  are  largely  used  in 
the  Philippine  Islands  for  women's  skii'ts  and  for  men's  trousers. 
Constructions  vary  from  52x44  to  76x64.  Numerous  Avidths  ai'c 
sold,  though  the  wider  cloths  are  preferred. 

"Striped  goods  are  used  considerably  for  shirts,  skirts,  trous- 
ers, and  upholstering.  The  'sarong,'  which  is  a  loose  fold  of 
cloth  worn  by  the  women  tucked  in  at  the  belt  usually  with  one 
coi-nei"  tucked  up,  is  generally  of  striped  patterns,  though  checks 
ai'e  also  used  somewhat. 

"Numerous  other  cloths  are  imported  to  a  greater  or  less  ex- 
tent.    Fancy  woven   goods,   designed   especially   for   women's 


DISTRIBUTION   POLICY  209 

waists,  are  imported  to  a  moderate  degree.  There  is  also  some 
demand  for  madras  for  men's  shirts,  ladies'  skirts  and  waists, 
and  for  draperies.  There  is  a  fair  market  for  crepe,  30-inch 
goods  of  72x48  construction  being  fairly  typical.  The  popular 
crepes  are  white,  dyed  in  the  piece  or  striped.  Cotton  trouser- 
ings, in  a  large  variety  of  patterns  and  constructions  from  64x56 
to  84x76,  are  imported  in  considerable  quantities.  The  cloths  of 
this  type  in  greatest  demand  are  made  on  wide  looms  and  are 
mostly  plain  woven,  though  there  are  some  fancy  weaves  on  the 
market.  Moderate  imports  of  cotton  lastings  and  linings  are 
received  and  fine  cotton  dress  goods,  such  as  tussores  and  repps, 
are  on  the  market.  These  dress  goods  are  made  of  mercerized 
yarn,  to  produce  a  lustrous  corded  effect,  finer  grades  being- 
used  for  repps  than  for  tussores.  A  small  amount  of  velveteen 
and  plush  is  imported,  and  a  considerable  quantity  of  cotton 
flannel.  Of  the  latter  the  usual  width  is  about  25  inches,  with, 
constructions  varying  from  64x48  to  80x68. 

"A  large  part  of  the  requirements  of  the  Philippine  market 
could  be  satisfied  with  cloths  handled  by  the  X  Company. 

"Two  classes  of  importers  are  to  be  found  in  the  Philippines — 
(1)  branches  of  trading  concerns  that  import  goods  needed  in 
the  islands  and  export  the  products  of  the  islands;  and  (2)  con- 
cerns that  merely  import  merchandise.  Both  classes  sell  to 
the  retailers  and  bazaars.  Most  of  the  American  business  in 
the  Philippines  is  done  through  houses  of  the  first  class,  an  ex- 
cellent example  of  which  is  Henry  Peabody  &  Co.  with  its  main 
office  in  New  York.  There  are  no  native  importers  of  importance ; 
most  of  the  houses  are  American,  English,  German,  or  Spanish. 
Though  Spanish  is  the  language  of  the  islands,  English  is  taught 
in  the  schools  and  is  of  growing  importance  commercially.  While 
it  would  be  of  advantage  for  a  man  doing  business  in  the  Philip- 
pines to  be  familiar  with  Spanish,  it  is  not  now  necessary. 

"The  X  Company  has  a  choice  of  three  methods  of  securing 
business  in  the  Philippines.  (1)  It  may  sell  its  goods  to  an 
American  exporting  concern  with  a  branch  in  Manila.  (2)  It 
may  establish  a  resident  agent  in  the  Philippines,  who  will  sell 
to  all  the  importers  in  the  islands.  (3)  It  may  send  out  a  sales- 
man from  the  United  States  once  a  year  to  call  on  the  trade  and 
take  orders. 

"The  third  method  is  adopted  by  a  number  of  European 
houses,  not  only  with  respect  to  their  Philippine  trade  but  also 
with  that  with  other  Asiatic  countries  such  as  India  and  the 
Dutch  East  Indies.  If  the  business  were  obtained  in  this  way, 
the  same  men  could  stop  at  Honolulu  on  the  way  and  obtain  as 
much  business  as  possible  there.  There  seems  to  me  to  be  little, 
if  any,  advantage  in  this  method,  first,  because  a  large  proportion 
of  the  time  is  used  up  in  traveling ;  and  second,  because  the  rep- 


210    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

resentative  is  not  on  the  ground  most  of  the  time  and  does  not 
become  so  thoroughly  acquainted  with  the  trade  and  its  needs 
as  a  resident  agent  could. 

"Since  practically  all  the  American  business  in  textiles  is 
done  through  export  houses  with  branches  in  the  Philippines, 
the  simplest  way  for  the  X  Company  to  market  its  goods  would 
be  by  the  first  method ;  i.e.,  through  one  of  these  exp'ort  houses. 
Such  a  procedure  would  be  similar  to  that  followed  by  the  com- 
pany in  dealing  with  domestic  jobbers,  for  the  order  would  be 
taken  in  New  York,  though  since  the  goods  would  be  shipped 
direct  to  the  Philippine  branch,  as  much  detail  would  be  in- 
volved as  in  the  case  of  goods  shipped  to  foreign  customers  gen- 
erally. The  usual  American  terms  could  be  quoted  and  accepted 
by  the  main  office  in  New  York,  if  any  advantage  accrued  to 
either  the  export  house  or  the  X  Company  by  so  doing.  The 
chief  advantage  of  this  method  of  securing  business  lies  in  its 
simplicity  and  in  the  minimum  of  risk  involved.  As  a  means  of 
ascertaining  by  test  the  amount  of  business  that  might  be  done, 
it  seems  an  excellent  plan.  On  the  other  hand,  the  usual  objec- 
tions to  developing  a  foreign  market  through  an  export  commis- 
sion house  apply  here.  Since  the  export  houses  are  in  reality 
importers  into  the  Philippines  and  sell  at  wholesale  to  the  Fili- 
pinos in  the  retail  trade,  uidess  sales  are  made  to  several  such 
export  houses,  the  result  is  pi-^ctically  the  granting  of  exclusive 
territory  to  a  buyer.  The  amount  of  business  done  is  therefore 
limited  to  the  amount  which  that  one  concern  can  handle.  Even 
if  all  American  export  houses  with  branches  in  the  Philippines 
were  customers  of  the  selling  house,  there  would  still  remain  a 
number  of  European  concerns  who  might  be  induced  to  buy 
American  cotton  piece  goods,  if  it  were  profitable  for  them  to  .do 
so,  but  who  would  not  be  likely  to  be  reached  if  this  method  of 
securing  business  were  used. 

"The  second  method  suggested  is  to  employ  a  resident  agent 
to  develop  the  trade  in  the  islands.  Such  a  man,  with  head- 
quarters at  Manila,  would  be  in  constant  touch  with  all  the  im- 
porters of  textiles.  He  would  be  able  to  compare  the  cloths  of 
the  mills  he  represented  with  those  of  other  countries,  and  to 
suggest  methods  of  improving  or  of  changing  the  products  to 
better  suit  the  needs  of  the  trade.  Occasional  visits  to  the  United 
States,  in  order  to  keep  in  touch  with  the  maiuifacturing  methods 
and  to  get  a  little  of  the  atmosphere  of  the  home  office,  would  be 
desirable.  Some  $7,000,000  worth  of  cotton  clotlis  nn)  imported 
into  the  Philippines  every  year.  It  does  not  seem  too  fanciful  to 
assume  that  a  live  representative  could  secure  one-tenth  of  that 
business  for  the  X  Company. 

"The  Philippine  importers  sell  to  the  retailers  on  60  or  90 
days'  credit,  charging  no  interest  but  making  the  price   high 


DISTRIBUTION    POLICY  211 

enough  to  include  all  carrying  charges.  For  themselves,  they 
like  enough  time  to  enable  them  to  see  the  goods  before  paying 
for  them.  As  it  takes  about  six  weeks  for  a  shipment  to  go  from 
New  York  to  Manila,  60  days  from  date  of  invoice  would  prob- 
ably be  satisfactory-,  or  2'/t   10  days  on  a  60  days'  dating. 

"The  International  Banking  Cor])oration,  now  controlled  by 
the  National  City  Bank  of  New  Y^ork,  has  a  branch  in  Manila, 
so  that  the  difficulties  of  financing  the  trade  with  the  Philippines 
are  entirel.y  obviated.  A  draft  on  a  Philippine  importer  would 
be  honored  in  New  York  with  no  delay  at  all. 

"The  provision  in  the  Philippine  tariff,  whereby  American 
goods  are  admitted  free,  has  been  of  greater  assistance  than  any- 
thing else  in  the  development  of  our  cotton  goods  trade  there." 


Problem  47 
The  Samuel  Paper  Company — Contracts  with  Export  Houses 

The  Samuel  Paper  Company  has  just  received  an  olTer 
from  the  General  Export  Company  to  become  its  exclu- 
sive agent  in  the  foreign  field.  Under  the  proposed  con- 
tract all  inquiries  from  or  with  respect  to  any  foreign 
country  shall  be  referred  to  the  General  Export  Com- 
pany. No  tonnage  allotment  is  to  be  made  to  the  Samuel 
Paper  Company  for  the  export  field,  it  being  understood 
that  the  said  export  company  shall  receive  the  same 
treatment  that  is  accorded  domestic  wiiolesalers.  The 
Samuel  Paper  Company  must  agree  to  pack  and  slii]> 
all  foreign  orders  according  to  the  specifications  laid 
down  by  the  General  Export  Company. 

The  General  Export  C^ompany  is  a  comparatively  new 
organization,  specializing  in  distributing  writing  paper, 
book  paper,  newsprint,  and  allied  lines  of  supplies  in  the 
foreign  field.  This  firm  has  been  extremely  active  in 
expanding  its  organization  and  operates  through  manu- 
facturers' agents  in  South  America,  West  Indies,  Eng- 
land, India,  and  Australia.  The  company  has  had  a 
rapid  growth  and  is  trying  to  tie  up  with  a  imniber  of 
paper  companies  to  insure  a  larger  number  of  lines  for 
its  agents  abroad.  Most  of  the  newsprint  handled  by 
this  company  comes  from  Canada.    In  summer  this  paper 


212    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

is  exported  directly  from  Canadian  ports,  but  in  mid- 
winter when  these  ports  are  closed  to  navigation  it  is 
transported  in  bond  across  the  border  into  the  United 
States  and  shipped  out  by  way  of  Portland,  Boston,  or 
New  York  City.  The  company  now  has  several  contracts 
with  paper-producing-  firms  on  the  same  basis  as  the 
proposal  made  to  the  Samuel  Paper  Company.  Inquiry 
among  these  firms  discloses  no  unsatisfactory  relations 
with  the  General  Export  Company,  but  all  these  contracts 
have  been  too  recent  to  permit  of  a  real  analysis  of  the 
situation. 

The  Samuel  Paper  Company  operates  a  large  paper 
mill,  a  sulphite  mill,  and  a  soda  pulp  mill,  located  in  a 
New  Kngland  town  of  about  5,000  population.  In  addi- 
tion, it  owns  extensive  stumpage  rights  in  the  northern 
part  of  Maine  near  the  Canadian  border.  This  firm  man- 
ufactures medium-grade  bond  and  writing  paper  and 
some  book  paper.  A  few  of  the  better  grades  of  the 
bond  and  writing  papers  are  loft-dried,  but  the  bulk  of 
the  writing  and  bond  papers  and  all  the  book  papers  are 
machine-dried.  The  company  does  not  use  its  own  water- 
marks on  its  writing  and  bond  papers  and  has  used  the 
marks  of  domestic  wholesalers  only  under  compulsion. 

The  Samuel  Paper  Company  is  desirous  of  securing 
foreign  trade  in  order  to  operate  its  factor^y  more  nearly 
at  full  capacity,  reduce  its  costs,  and  sell  its  product 
to  better  advantage,  thereby  increasing  its  profits.  In 
1921  its  mills  were  operating  only  81%  of  the  time  and 
although  that  year  was  considered  unusual  almost  every 
season  witnesses  occasional  shutdowns.  These  shut- 
downs consume  the  company's  profits.  After  the  mills 
have  been  operating  for  a  sufficiently  long  period  to  take 
care  of  the  year's  fixed  charges,  orders  may  suddenly 
fall  off,  and  when  the  firm  should  be  making  the  greater 
part  of  its  profits,  it  is  in  reality  losing  money.  In  the 
domestic  market  the  company  sells  f.  o.  b.  mill  to  whole- 
salers who  are  given  exclusive  rights  in  their  territory 
on  condition  that  they  carry  no  competing  lines.  In  the 
foreign  field  the  company  has  never  granted  an  exclusive 
agency  nor  made  any  systematic  attempt  to  obtain  for- 


DISTRIBUTIOX   POLICY  213 

eign  business,  being  content  to  secure  business  from 
whatever  source  presented  itself.  From  time  to  time 
some  foreign  orders  have  been  received  through  com- 
mission houses. 

The  Gilbreadth  Manufacturing  Company,  a  competitor 
of  the  Samuel  Paper  Company,  has  given  exclusive  rights 
to  an  export  house  operating  in  South  America.  A 
written  contract  with  this  firm  provides  many  of  the 
same  conditions  that  are  contained  in  the  proposal  of  the 
General  Export  Company.  This  agent,  however,  is  one 
of  the  many  new  export  companies  that  has  grown  up  in 
this  field  the  past  few  years  and  has  tied  up  a  numbei' 
of  lines  with  contracts,  not  with  the  idea  of  pushing  these 
lines  but  in  order  to  prevent  a  competitor  from  getting 
them.  The  Gilbreadth  Company  manufactures  writing 
and  bond  papers  exclusively,  using  its  own  watermark. 
Through  direct-by-mail  circularizing  in  the  foreign  iield 
and  advertising  in  trade  papers  and  other  magazines 
with  a  foreign  circulation,  tjie  Gilbreadth  Company  has 
induced  its  agent  to  push  the  sale  of  its  paper,  but  the 
amount  spent  by  this  firm  for  foreign  advertising  par- 
ticularly at  the  start  has  been  out  of  proportion  to  its 
export  sales. 

Another  paper  manufacturer  giving  an  exclusive 
agency  to  an  export  house  is  the  Larson  Company, 
which  manufactures  high-grade  book  papers.  This  firm 
has  a  written  agreement  with  its  exclusive  agent  in  the 
foreign  field  that  the  latter  shall  take  a  specified  amount 
of  paper  each  month,  the  price  being  fixed  every  three 
months  for  the  next  quarterly  period.  In  this  manner  the 
Larson  Company  has  avoided  having  its  line  tied  up  witJi 
an  exporter  Avho  is  acting  as  its  exclusive  agent  but  who 
is  not  interested  in  pushing  its  lines.  In  return  for  this 
concession  the  Larson  Company  has  agreed  to  fill  orders 
promptly,  even  giving  priority  over  domestic  shipments 
if  necessary.  It  has  also  agreed  to  supply  the  export 
house  with  circulars,  electrotypes,  and  other  advertising 
data,  but  it  does  no  direct  advertising  in  the  foreign 
field.    Its  contract  was  made  under  favorable  export  eon- 


214    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ditions  brought  about  by  the  war  and  it  is  doubtful 
whether,  with  German  and  other  European  competition, 
a  reputable  firm  could  be  induced  to  undertake  such  a 
contract  with  the  Samuel  Paper  CV)mpany  at  the  present 
time. 

One  of  the  best-known  manufacturers  of  book  paper  in 
the  United  States  is  the  Greenfield  Company  which  adver- 
tises extensively  in  magazines  with  a  national  circulation. 
In  foreign  trade  this  company  deals  exclusively  with  an 
export  house  which  has  long  had  a  reputation  for  the 
efficiency  and  ability  of  its  organization  operating 
throughout  Latin  America.  No  written  contract  exists 
between  the  two  firms,  each  operating  under  a  gentle- 
man's agreement  that  it  will  do  everything  reasonable 
to  promote  the  interests  of  the  other.  The  export  house 
realizes  that  the  Greenfield  Company  depends  upon  for- 
eign trade  to  help  dispose  of  its  product  and  unless  satis- 
factory service  is  rendered,  this  company  will  be  apt  to 
open  negotiations  with  another  house.  On  the  other 
hand  the  Greenfield  Company  gives  this  firm  its  lowest 
price  concessions  and  furnishes  prompt  service,  because 
it  realizes  that  only  by  these  steps  can  the  export  com- 
pany be  induced  to  continue  to  push  the  sale  of  its  product 
in  preference  to  some  other  line.  In  advertising  abroad 
the  Greenfield  Company  spends  a  fixed  percentage  of  its 
sales  in  the  foreign  field.  As  its  sales  increase  the 
amount  of  money  spent  for  advertising  increases  like- 
wise. This  policy  applies  to  the  foreign  field  as  a  whole ; 
the  amount  of  money  spent  for  advertising  in  each  coun- 
try does  not  necessarily  depend  upon  the  previous 
amount  of  sales  in  that  country. 

The  Hutchins  Company  has  no  exclusive  agents  among 
export  houses.  Many  of  the  large  export  and  commis- 
sion houses  refuse  to  buy  paper  except  at  the  lowest 
figure  obtainable.  Because  of  the  fluctuations  in  the 
price  of  paper  they  are  able  frequently  to  secure  a  much 
lower  price  by  purchasing  in  the  open  market  than  they 
would  if  they  operated  under  a  contract  with  a  paper 
manufacturer.     When  these   export  houses   receive   an 


DISTRIBUTION    POLICY  215 

order  from  abroad  for  book  or  writing  paper,  they  send 
out  twenty  to  thirty  hitters  asking  for  bids  on  paper  of 
the  required  specifications  and  usually  give  the  order  to 
the  lowest  bidder.  This  method  does  not  enable  the 
Hutchiiis  Company  to  build  up  permanent  customers 
abroad,  but  it  does  enable  it  to  dispose  of  its  product 
when  the  domestic  market  has  slumped.  Furthermore 
the  paper  company  is  able  to  sell  large  quantities  of  its 
product,  provided  the  price  is  right.  The  Hutchins  Com- 
pany does  not  do  foreign  advertising,  although  it  does 
advertise  to  export  and  commission  houses  both  directly 
by  mail  and  through  export  trade  papers. 

Should  the  Samuel  Paper  Company  continue  to  sell 
to  several  commission  houses  or  should  it  give  one  house 
its  exclusive  agency  in  the  foreign  field?  If  it  is  decided 
to  grant  an  exclusive  agency,  should  the  offer  of  the  Gen- 
eral Export  Company  be  accepted?  Should  there  be  a 
written  agreement  between  the  Samuel  Paper  Company 
and  its  exclusive  agent?  If  so,  what  should  be  the  terms 
of  this  agreement? 

Should  the  Samuel  Paper  Company  advertise  in  the 
foreign  field?  If  so,  what  should  be  the  duration  of  this 
advertising  campaign?  To  what  extent  should  the  com- 
pany use  direct-by-mail  advertising?  To  what  extent 
should  the  company  advertise  in  trade  papers  circulating 
abroad?  Should  the  Samuel  Paper  Company  spend  a 
definite  percentage  of  its  foreign  sales  on  advertising, 
increasing  this  amount  as  sales  increased,  or  should  the 
advertising  appropriation  be  based  on  the  number  of 
potential  customers  in  each  market  regardless  of  past 
sales  records? 


216    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  48 

The  Rollins  Paper  Company — 
Contract  for  Foreign  Distribution 

In  tlie  spring  of  1919  the  Rollins  Paper  Company 
received  a  proposal  from  the  Giles  Company  to  become 
its  foreign  representative.  Previous  to  this  time  there 
had  been  some  demand  from  South  American  firms  for 
Rollins  paper.  This  company  had  always  been  able  to 
sell  its  entire  production  in  the  United  States,  but 
because  of  the  favorable  price  offered  by  these  foreign 
houses,  it  had  given  agency  rights  to  a  firm  in  Buenos 
Aires,  and  at  the  time  this  offer  was  made  the  Rollins 
Company  was  seriously  considering  the  advisability  of 
developing  its  foreign  trade.  After  several  conferences 
between  representatives  of  the  Rollins  Paper  Company 
and  the  Giles  Company,  the  latter  submitted  the  follow- 
ing contract  as  a  statement  of  the  conditions  under  which 
it  was  prepared  to  become  the  foreign  representative  of 
the  paper  company. 

1.  That  the  Rollins  Standard  Lines  shall  be  promoted  in  for- 
eign markets  exclusively  through  the  Giles  Company  and  their 
representatives  with  the  exception  of  South  America,  where 
connections  have  already  been  made  and  other  possible  excep- 
tions as  hereinafter  noted,  and  that  the  Rollins  Paper  Company 
shall  be  relieved  of  the  financial  burden  of  exploiting  the  Rol- 
lins Lines  in  the  foreign  markets  covered  by  this  agreement,  ex- 
cept in  the  case  of  advertising  literature  and  material  that  could 
be  made  available  for  publicity  work  in  such  markets. 

2.  That  all  inquiries  from,  or  with  respect  to,  any  foreign 
country  other  than  those  stated  shall  be  referred  to  the  Giles 
Company  as  the  foreign  sales  department  of  Rollins  Paper  Com- 
pany. 

3.  That  such  inquiries  shall  be  tliorouglily  investigated  by  the 
Giles  Company  and  all  reports  and  records  of  such  iuvestigations 
sliall  he  open  to  insjH'ctioii  and  analysis  by  Rollins  l*aper  Com- 
pany. 

4.  Rollins  Paper  Company  reserves  the  privilege  of  acting  in- 
dependently of  the  Giles  (^ompany  in  connection  with  any  par- 


DISTRIBUTION    POLICY  217 

ticular  market  ^\•hich  iu  its  jiul<i-meiit  requires  immediate  atten- 
tion and  upon  which  the  Giles  Company  has  declared  itself  nega- 
tively. 

5.  Until  such  a  time  as  the  Giles  Comj)aiiy  has  made  definite 
connections  or  selling  arrangements  satisfactory  to  Rollins  Paper 
Comi)any,  in  any  particular  foi-eign  territory,  the  Rollins  Paper 
Company  may  accept  orders  for  shipment  to  such  territory  from 
any  properly  constituted  Rollins  Distributors,  but  shall  not  for- 
mally allot  any  foreign  tonnage  to  cover  such  business.  It  shall, 
however,  be  made  clear  to  such  Distributors  by  Rollins  Paper 
Company  that  such  accepted  orders  carry  no  obligation  on  the 
part  of  the  Rollins  Pa})er  Company  to  cojitinue  the  practice,  and 
it  shall  also  be  pointed  out  that  a  definite  foreign  policy  is  being 
pursued  which  should  ultimately  close  such  market  to' any  gen- 
eral solicitation  of  orders  for  Rollins  Papers. 

6.  This  agreement  jiresupposes  that  so  far  as  Book  Papers  are 
concerned  the  pi'omotion  of  the  Rollins  Standard  Lines,  and  in 
every  way  in  accordance  with  the  established  Rollins  Policy,  will 
become  the  principal  efiort  of  the  Giles  Company  in  all  foreign 
markets  covered  by  this  agreement — that  the  Rollins  name  and 
trade-marks  will  be  thoroughly  exploited  and  carried  to  the  con- 
sumer and  that  in  every  Avay  the  best  interests  of  Rollins  Paper 
Company  w^ill  be  served  by  the  Giles  Company  as  certainly  as 
their  owji. 

7.  It  is  understood  and  agreed  that  a  definite  obligation  rests 
upon  Rollins  Paper  Company  to  provide  Rollins  Standard  Lines 
in  such  qualities  and  quantities  as  its  product  and  domestic  obli- 
gations permit  for  the  further  development  of  foreign  trade. 
Just  what  this  monthly  or  yearly  tonnage  will  be  cannot  now 
be  accurately  determined,  but  both  parties  to  this  agreement 
recognize  the  absolute  necessity  of  an  independent  allotment  of 
tonnage  to  cover  this  prospective  work. 

8.  All  papers  furnished  by  Rollins  Paper  Comi)any  under  this 
agreement  shall  be  invoiced  to  Giles  Company  at  standard  prices 
and  subject  to  terms,  special  packing  differentials,  and  general 
trade  customs  as  shall  from  time  to  time  be  fixed  by  Rollins 
Paper  Company  for  foreign  business.  Such  prices,  terms,  and 
conditions  will  also  api)ly  to  the  Latin  American  and  West  In- 
dian busini'ss. 

9.  Inasmuch  as  Giles  Comi)any  nnist  go  to  lai-ge  expense  of 
time,  money,  and  effoi't  in  the  development  of  this  foreign  busi- 
ness and  must,  therefore,  be  insured  of  the  permanency  of  the 
arrangement  and  proper  return  on  its  investment,  it  is'  the  ex- 
pectation that  this  agreement  shall  be  enduring.  In  any  event 
it  is  not  subject  to  termination  except  by  mutual  consent  before 


218    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

July  1,  1925,  and  after  that  date  only  upon  one  year's  written 
notice  being  given  bj'  eithei-  party. 

10.  This  agreement  is  not  intended  to  include  the  exploitation 
or  distribution  of  the  Rollins  Lines  in  the  Dominion  of  Canada 
and  in  connection  Avith  ^vhi(•ll  all  rights  are  reserved  by  Rollins 
Paper  Company. 

At  the  time  this  proposal  Avas  submitted  the  Rollins 
Company  produced  approximately  18,000  tons  of  high- 
grade  book  paper  a  year.  Its  total  output  was  sold  to 
wholesale  distributors  who  were  required  to  carry  a  full 
line  of  goods  and  to  pay  all  bills  by  the  15th  of  each 
month.  Each  distributor  was  given  an  allotment  of  a 
certain  number  of  tons  each  month,  and  under  no  con- 
dition was  he  allowed  to  carry  paper  of  a  competing 
company.  Freight  allowances  were  made  to  distributors 
by  zones,  and  each  wholesaler  was  required  to  observe 
the  price  laid  down  by  the  Rollins  Company.  Its  product 
was  sold  entirely  under  its  own  brand,  which  was  adver- 
tised extensively  through  a  national  weekly,  a  business 
magazine,  and  occasionally  other  magazines,  booklets, 
circulars,  and  moving  pictures.  Its  total  advertising 
expense  amounted  to  over  3%  of  its  annual  sales. 

The  Giles  Company,  which  was  the  largest  of  these 
distributors,  handled  over  25%  of  the  Rollins  Company's 
output,  most  of  which  was  disposed  of  through  fifteen 
branch  houses  covering  the  territory  west  of  the  Missis- 
sippi. This  company  was  also  a  heavy  advertiser  of 
Rollins  paper  and  the  relations  between  the  two  com- 
panies had  always  been  entirely  satisfactory.  The  Giles 
Company  had  handled  some  foreign  sales  for  other  paper 
companies  and  was  interested  in  extending  its  efforts  in 
the  export  field.  It  proposed,  therefore,  to  spend  $200,- 
000  during  the  next  two  years,  studying  foreign  markets 
and  establishing  foreign  agencies. 

In  1919  the  Rollins  Company  could  have  sold  twice  its 
total  output  in  the  United  States.    It  was  estimated  that 


DISTRIBUTION  POLICY  219 

the  increase  in  the  demand  for  book  paper  for  the  country 
as  a  whole  was  normally  8%  a  year.  During  the  five 
years  of  the  war  there  had  been  no  increase  in  manufac- 
turing capacity  and  hence  there  was  an  estimated  short- 
age of  approximately  40%.  New  paper  machinery  could 
not  be  obtained  for  delivery  mthin  a  year  and  a  half, 
and  it  appeared  that  this  shortage  would  continue  for 
several  years.  Although  foreign  prices  were  higher  than 
those  in  the  United  States,  the  domestic  business  had 
distinct  advantages,  in  that  in  the  domestic  market  the 
Rollins  Comi3any  was  able  to  sell  its  paper  f.  o.  b.  mill  and 
secure  cash  payment  within  a  comparatively  short  time. 

If  the  Rollins  Paper  Company  had  accepted  the  pro- 
posal of  the  Giles  Company  it  might  become  necessary 
for  it  to  organize  a  shipping  department  to  handle  its 
foreign  orders.  It  would  also  have  been  faced  with  the 
problems  of  credit,  with  all  the  legal  complications 
imposed  by  the  different  countries.  There  was  also  some 
possibility  that  it  would  have  had  difficulty  in  supplying 
the  demand  created  by  the  Giles  Company. 

On  the  other  hand,  it  was  evident  that  a  depression 
would  probably  occur  in  the  domestic  market  at  some 
future  date,  at  which  time  the  Rollins  Company  would  be 
able  to  dispose  of  its  surplus  in  the  foreign  market  if 
it  accepted  the  contract  with  the  Giles  Company.  The 
price  offered  by  foreign  houses  was  high  and  it  was 
thought  that  the  demand  might  be  stabilized  by  broad- 
ening out  and  securing  foreign  trade. 

Should  the  Rollins  Paper  Company  have  accepted  the 
contract  with  the  Giles  Company  in  1919? 


220    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  49 

Stuart  Company — Commission  House  versus 
Combination  Export  Manager 

The  Stuart  Company  is  considering  the  advisability  of 
entering  into  a  ten-year  contract  with  the  Edwards 
Export  Corporation  which  handles  the  foreign  sales  of 
allied  lines  such  as  steam  injectors,  steam  valves,  pipe 
wrenches,  steam  fittings,  belts  and  rubber  hose. 

Although  the  Stuart  Company  handles  its  exports 
through  commission  houses  its  managers  hope  eventually 
to  secure  direct  distribution  through  the  company's  own 
salesforce.  Since  its  establishment  in  1907,  this  company 
has  devoted  itself  exclusively  to  the  manufacture  and 
sale  of  rubber  belting  and  packing.  Its  product  has  a 
reputation  for  high  quality  in  the  United  States,  and  its 
business  has  grown  until  its  annual  sales  are  approxi- 
mately $2,300,000 ;  its  foreign  trade,  except  for  the  years 
during  the  war,  has  remained  at  approximately  $120,000. 
After  a  study  of  the  foreign  trade  conditions  the  man- 
agers of  the  company  do  not  see  much  hope  for  a  rapid 
increase  in  this  field  for  the  next  five  or  six  years. 

The  Edwards  Export  Corporation  has  salesmen  in 
practically  all  countries  of  the  world.  Its  total  annual 
volume  of  business  is  over  $5,000,000  and  all  goods  are 
handled  on  a  commission  basis.  The  orders  which  the 
export  corporation  receives  through  its  salesmen  are 
turned  over  to  the  manufacturing  company  producing  the 
goods.  The  manufacturing  company  must  fill  the  order, 
ship  the  merchandise,  make  out  all  bills,  investigate  the 
credit  risk,  and  take  care  of  collections.  The  export 
corporation,  however,  gives  advice  to  the  manufacturing 
company  on  the  credit  condition  of  the  foreign  buyer  and 
also  assists  in  settling  adjustments  and  claims,  since  its 
salesmen  are  on  the  ground. 

In  order  to  secure  outside  advice  the  president  of  the 
Stuart  Company  consulted  the  export  manager  of  the 
Carleton  Company  manufacturing  steam  fittings.  This 
man  explained  the  position  of  his  company  as  follows: 


DISTRIBUTION  POLICY  221 

"We  have  turned  down  all  offers  to  join  an  export  association 
or  to  allow  our  foreign  business  to  be  handled  by  an  outside 
company,  because  we  want  to  be  identified  directly  as  the 
Carleton  Company.  We  do  not  care  to  have  our  customers  think 
of  Carleton  products  as  something  that  is  handled  by  the  Smith 
or  Jones  export  company.  We  want  them  to  know  that  we  are 
directly  interested  in  their  welfare  and  that  we  are  anxious  to 
build  up  a  permanent  business  connection  with  them. 

"Our  company  does  over  $1,000,000  worth  of  export  busi- 
ness each  year.  We  are  trying  to  build  up  a  permanent  clientele 
in  the  foreign  field  and  to  do  this  we  want  to  keep  control  of 
our  salesmen  so  that  we  are  sure  we  are  not  being  misrepre- 
sented. 

"Now  what  applies  to  my  business  should  also  apply  to  yours. 
If  you  enter  into  a  contract  with  this  export  corporation  you 
will  not  have  the  same  control  over  the  salesmen  you  would 
have  if  you  had  your  own  force  in  the  field.  However,  unless 
your  export  sales  are  large  enough  to  warrant  the  establishing 
of  such  a  foreign  sales  organization,  you  will  doubtless  be  able 
to  secure  a  much  greater  distribution  of  your  product  at  a 
lower  cost  if  j^ou  enter  into  a  contract  with  this  export  corpora- 
tion. Its  salesmen  are  experienced  in  handling  lines  of  prod- 
ucts closely  associated  to  your  own.  You  know  your  own  busi- 
ness better  than  I  do.  The  point  you  must  decide  upon  is 
whether  or  not  your  business  is  large  enough  to  permit  you  to 
branch  out  and  establish  your  own  foreign  sales  organization, 
or  whether  it  would  be  better  policy  for  you  to  go  in  with  the 
Edwards  Export  Corporation." 

While  the  Stuart  Company  was  considering  the  pro- 
posal to  give  over  its  export  business  to  the  Edwards 
Corporation,  a  letter  was  received  from  C.  K.  Benjamin, 
a  well-knowai  export  manager,  who  proposed  that  they 
enter  into  a  contract  with  him  to  act  as  export  manager 
for  the  Stuart  Company  and  several  other  companies, 
with  headquarters  in  New  York  City.  Mr.  Benjamin  in 
his  letter  stated  that  he  had  severed  his  connections  with. 
the  Converse  Company  and  was  planning  to  continue  his 
export  career  upon  a  somewhat  different  basis  than  he 
had  followed  previously  in  managing  export  departments 
of  several  internationally  known  concerns.  He  stated 
that  he  had  found  in  his  previous  experience  that  many 
medium-sized  or  smaller  concerns,  which  wished  to  export 
direct  to  foreign  markets,  did  not  need  and  could  not 


222    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

afford  the  full-time  services  of  an  experienced  and  com- 
petent export  manager.  However,  an  export  manager 
of  such  caliber  could  efficiently  direct  the  export  sales  of 
five  or  six  such  concerns  at  a  salary  cost  to  each  one  very 
considerably  less  than  would  be  paid  for  even  a  second- 
or  third-rate  man  on  full  time.  He  had  decided,  there- 
fore, to  take  up  the  work  of  combination  export  manager 
for  three  companies — one  a  manufacturer  of  plumbing 
supplies,  another  of  steam-fitting  supplies,  and  the  third 
of  rubber  hose  of  various  types.  Mr.  Benjamin's  pro- 
posal to  the  Stuart  Company  includes  a  payment  of  $100 
a  month  for  salary,  a  pro  rata  share  of  the  expenses  of 
maintaining  an  office  and  show-room  in  New  York  City, 
and  a  commission  on  business  secured.  His  ability  is 
unquestioned,  but  it  is  known  that  he  has  no  great  finan- 
cial backing.  Upon  the  basis  of  inquiries  they  have  come 
to  the  conclusion  that  the  question  does  not  hinge  upon 
Mr.  Benjamin's  ability  but  is  rather  a  question  of  general 
policy  as  to  whether  they  wish  to  export  direct,  through 
commission  houses,  or  through  this  combination  export 


Problem  50 
The  Logan  Co. — Choice  of  Methods  in  Export  Selling 

The  Logan  Chemical  Company,  located  in  a  New  Eng- 
land manufacturing  city,  produces  and  distributes  a  com- 
plete line  of  soaps  and  cosmetics.  Among  their  products 
is  a  facial  cream  manufactured  by  a  secret  process,  which 
has  been  especially  successful.  Their  domestic  business 
has  been  large,  while  through  a  New  York  commission 
house  their  products  have  been  sold  in  numerous  foreign 
markets. 

The  wholesale  drug  firm  of  Roberts  and  Small  of  New 
York,  up  to  1919,  had  handled  practically  all  the  export 
business  for  the  Tjogan  Chemical  Company.  Ostensibly, 
the  New  York  firm  acted  as  an  export  agent  for  the 
Logan  products,  but  really  it  was  more  in  the  nature  of 

*Upon  the  combination  export  manager,  cf.  Hough,  Practical  Exportinff, 
page  105;  and  Wyman,  Export  Merchandising,  Chap,  IX. 


DISTRIBUTION   POLICY  223 

an  export  commission  house.  All  goods  were  billed  at  a 
large  discount  for  export,  and  cash  was  paid  in  ten  days, 
thus  ending  each  transaction  so  far  as  the  Logan  Com- 
pany was  concerned. 

In  order  to  keep  in  touch  with  foreign  business,  how- 
ever, the  Logan  management  insisted  that  Roberts  and 
Small  submit  lists  of  foreign  sales  at  regular  intervals. 
This  was  done  for  some  time  in  an  unsatisfactory  man- 
ner until  early  in  1917,  when  the  New  York  wholesale 
firm  stopped  sending  the  information  entirely  and  did  not 
reply  to  the  request  of  the  Logan  Company  for  the  infor- 
mation. 

Early  in  1919,  the  Logan  Company  gave  the  agency 
for  Porto  Rico  to  the  West  Indies  Drug  Company  of 
New  York  and  San  Juan,  Roberts  and  Small  had  been 
reporting  a  business  of  about  $200  a  year  with  Porto 
Rico,  while  the  West  Indies  Drug  Company  claimed  that 
it  could  do  a  business  of  about  one-hundred  times  as  nmch 
value  on  the  Island,  since  the  company  had  a  large  imm- 
ber  of  representatives  there.  When  the  West  Indies 
Drug  Company  started,  however,  to  sell  the  Logan  prod- 
ucts the  Roberts  and  Small  Company  commenced  quoting 
lower  prices  to  Porto  Rican  retailers  to  such  an  extent 
that  they  were  losing  money  on  sales.  Naturally  the 
West  Indies  Drug  Company  protested.  The  Roberts 
and  Small  Company  gave  little  attention  to  the  inquiries 
of  the  Logan  Company  concerning  the  matter. 

As  a  result  of  the  continued  friction  with  Roberts 
and  Small  the  Logan  Compan_y  took  under  consideration 
a  change  of  policy  in  their  foreign  distribution,  whereby 
they  could  rid  themselves  of  the  services  of  the  New  York 
firm.  At  this  time  the  Logan  products  were  already 
known  in  a  number  of  foreign  markets,  as  stated,  and  the 
demand  for  them  was  indicated  to  the  Logan  Company 
from  the  many  direct  requests  for  agencies  that  were 
received.  The  management  of  this  company,  however, 
had  little  idea  of  what  prices  were  quoted  abroad  by 
Roberts  and  Small,  and  only  a  vague  idea  of  the  identity 
of  the  latter 's  customers. 


224    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

In  this  country  the  Logan  Company  markets  its  prod- 
uct direct  to  the  retailer,  since  it  has  found  that  distri- 
bution through  the  wholesaler  did  not  give  the  aggressive 
selling  that  the  management  desired.  The  president  of 
the  Logan  Company  felt  inclined  to  pursue  the  same 
policy  abroad. 

Should  the  Logan  Company  have  undertaken  a  more 
direct  control  of  its  exporting?  If  so,  what  measures 
should  have  been  adopted  under  the  circumstances? 

Would  it  have  been  advisable  for  this  company  to  have 
tried  to  sell  direct  to  the  retailers  in  Porto  Rico  and  other 
Latin  American  countries? 


Problem  51 

Baker-Greene  &  Company — General  Importers 
AS  Agents  versus  Sale  to  Foreign  Dealers* 

The  question  of  paramount  interest  to  Baker-Greene 
&  Company  at  the  present  time  is:  "Should  the  firm  con- 
tinue the  sale  of  cotton  textiles  through  agents  in  the 
foreign  field  or  should  it  attempt  to  sell  its  product  to 
foreign  wholesalers,  jobbers,  large  retailers  and  large 
consumers  through  its  own  salesforce?"    This  question 

*For  information  upon  export  agents,  consult  Wyman,  Export  Merchandis- 
ing, Chap.  XXVIII;  Dudeney,  The  Exporter's  Eandhnolc  and  Glossary, 
Chaps.  VIII-X ;  Hough,  Practical  Exporting,  pages  284-308;  Filsinger  (Irv- 
ing National  Bank),  Trading  with  Latin  America,  pages  77  and  78;  Pre- 
eiado.  Exporting  to  the  World,  Chap.  IX;  Vedder,  American  Methods  in 
Foreign  Trade,  Chaps.  V  and  IX;  Miscellaneous  Series  No.  81,  Chap.  V. 
In  a  series  of  articles  by  W.  F.  Wyman  in  the  World's  Markets  (July, 
August,  and  October  1919)  a  convenient  classification  of  export  agents  is 
given;   Mr.  Wyman  says  in  part: 

"A  simple  definition  of  the  export  agent  is  'one  who  acts  in  any  selling 
capacity  for  the  exporter.'  This  definition  has  tlie  virtue  of  emphasizing  the 
selling  function  of  the  agent  and  is  broad  enough  to  include  almost  all  of 
the  many  types  of  agents  whose  variety  of  activities  perplexes  both  the 
novice  and  veteran  in  exporting. 

"The  first  major  division  of  types  is  based  on  the  location  of  the  agent. 
For  tlie  export  agent  may,  and  often  does,  have  his  head(]uarters — if  not  his 
sole  residence — in  the  country  of  the  exporter.    Agents  of  this  type  include: 

1.  Tlie  American  selling  agency. 

2.  The  export  company. 

3.  The  export  house. 


DISTRIBUTIOX   POLICY  225 

has  been  under  nominal  consideration  for  several  years, 
but  it  has  been  brou^'ht  home  more  forcibly  within  the 
past  year  or  two  through  the  increased  activity  of  the 
company's  largest  competitor  who  is  a  strong  and  suc- 
cessful advocate  of  direct  sales  methods.  Although 
Baker-Greene  &  (^:>mpany  sell  textiles  to  a  limited  extent 
in  Europe  and  in  China,  India,  and  Australia,  the  deci- 
sion is  concerned  principally  with  Latin  America. 

Originally  the  fiim  adopted  the  policy  of  dealing  with 
wholesalers  and  large  consumers  through  agents,  because 
it  could  not  aiford  to  place  a  large  enough  salesforce  in 
the  field  to  cover  the  countries  of  Latin  America. 
Although    the    company's    financial    condition    and    the 

"The  agent  abroad  can  be  similarly  classified: 

1.  The  resident  combination   salesman. 

2.  The  manufacturers '   representative. 

3.  The  general  importer. 

4.  The  Avholesaler. 

5.  The  wholesaler  and  retailer. 

6.  The    retailer. 

7.  The  consumer. 

"The  second  major  division  is  based  on  the  relation  of  the  agent  to  the 
exporter.     This  division  is  one  which  contains  but  three  classes: 

1.  Those  who  sell  for  the  account  of  the  exporter. 

2.  Those  who  buy  from  the  exporter  and  resell. 

3.  Those  Avho   buy  but  do   not   resell. 

"It  is  obvious  that  each  agent  must  be  included  in  both  of  these  major 
divisions.  The  export  house  in  the  United  States  supplies  the  most  common 
example;  for  its  residence  is  in  the  country  of  the  seller  and  it  buys  from 
the  exporter  for  purposes  of  re-sale  outside  the  United  States.  It  must 
be  remembered  that  there  is  no  agency  relation,  however,  unless  there  are 
exclusive  territorial  rights  involved.  Otherwise  the  transaction  is  simply 
between  buyer  and  seller. ' ' 

Professor  Hellauer,  in  his  JV elthandcJslehre  in  discussing  import  organi- 
zation in  the  importing  country,  therefore  the  buying  organization  for  ex- 
porters located  in  other  countries,  divides  importers  into  two  groups :  first, 
importers  in  the  wider  sense  including  foreign  factories  which  import  ma- 
terials and  ecjuipment,  wholesalers  and  retail  dealers  who  import  occasion- 
ally, foreign  branches  and  branch  factories,  governments,  and  banks  which 
sometimes  act  as  consignees.  In  the  importing  of  raw  materials  even  large 
manufacturers  do  not  always  import  direct,  because  of  the  very  much  greater 
risk  connected  with  the  import  of  raw  materials,  a  risk  which  is  minimized 
by  the  specialized  importer  who  follows  the  markets  at  all  times  with  ex- 
treme care.  The  second  general  class  of  importers  are  importers  in  the 
narrower  sense  including  wholesale  and  some  retail  dealers  who  regularly 
import  one  or  more  lines  of  goods  (these  carry  stocks)  ;  and  secondly,  gen- 
eral importers  operating  either  upon  a  commission  basis  or  upon  a  merchant 
basis,  frequently  receiving  goods  on  consignment  from  exporters  in  other 
countries;  importers  of  standardized  raw  materials  sometimes  act  almost 
purely  in  the  capacity  of  brokers. 


226    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

amount  of  its  South  American  business  has  changed 
sufficiently  to  warrant  the  establishment  of  a  salesforce, 
a  number  of  considerations  have  induced  the  company 
to  continue  its  old  method.  In  the  first  place,  by  paying 
agents  a  fixed  commission  for  goods  sold,  the  company 
insures  a  definite  selling  expense  percentage.  In  periods 
of  depression  such  as  occurred  in  1920  and  1921  when 
the  sales  of  the  company  fell  oft",  it  was  able  to  maintain 
the  same  number  of  representatives  without  increasing 
its  percentage  of  expense.  Transportation  in  South 
America  is  poor;  railroad  lines  are  short,  usually  running 
from  a  port  on  the  seacoast  to  the  largest  inland  towns 
only ;  river  and  ocean  transportation  must  be  relied  upon 
to  a  large  extent;  and  it  is  difficult  for  a  salesman  to 
cover  a  large  territory  rapidly.  Although  a  season  may 
cover  six  months  or  longer,  the  actual  period  during 
which  the  dealers  place  their  orders  is  comparatively 
short.  Frequently  the  buying  is  put  off  as  long  as  pos- 
sible in  order  to  judge  the  demand  for  the  coming  season. 
It  has  consequently  been  of  benefit  to  the  company,  in 
securing  orders  during  the  brief  period  when  the  buying 
season  is  at  its  height,  to  be  represented  on  the  ground 
at  all  times  by  agents. 

From  another  standpoint  the  company's  reliance  upon 
agents  has  not  produced  such  satisfactory  results.  Diffi- 
culty has  been  experienced  in  inducing  agents  to  push  the 
sale  of  Baker-Greene  &  Company's  textiles.  Some  of 
these  Latin  American  representatives  do  not  understand 
the  ways  of  aggressive  selling  and  frequently  are  content 
to  follow  old  methods  of  letting  orders  seek  the  firm 
rather  than  having  the  firm  seek  the  orders.  Because  of 
this  the  firm  has  been  obliged  to  maintain  a  staff  of 
travellers  to  visit  these  agents  at  least  once  in  each  sell- 
ing season,  and  this  selling  expense  has  therefore  been 
greater  than  the  percentage  of  commissions  paid  the 
agents. 

The  direct  sales  policy  of  the  largest  competitor  of 
Baker-Greene  &  Company  overcomes  some  of  these  evils. 
American  salesmen  can  be  trained  according  to  the  com- 
pany's latest  methods  and  policies,  they  are  usually  more 


DISTRIBUTION   POLICY  227 

inclined  to  try  aggressive  selling  than  native  agents,  and 
they  are  in  closer  touch  with  the  conditions  in  the  textile 
mills  whose  product  the  company  sells.  By  dealing  direct 
with  customer's  through  its  own  salesmen  the  company 
may  increase  its  cost  of  distribution,  but  it  is  getting 
better  acquainted  -wdth  its  customers  and  avoiding  the 
dangers  of  misunderstanding  which  sometimes  arise 
from  dealing  through  a  third  party. 


Problem  52 
Nichols   Company — Branch    vs.    Foreign   Wholesalers* 

In  selling  its  filing  cases,  steel  top  tables,  and  other 
office  equipment  in  foreign  countries  the  Nichols  Com- 
pany has  dealt  directly  with  manufacturers,  merchants, 
and  other  business  men  through  its  own  salesforce.  In 
England  a  branch  sales  office  and  warehouse  have  been 
established  to  carry  large  stocks  and  facilitate  shipments, 
inasmuch  as  office  equipment  is  too  expensive  and  too 
bulky  a  product  to  permit  the  average  dealer  to  carry  afull 
stock.  Toother  European  countries  and  to  Argentina, Bra- 
zil, Llexico,  Cuba,  Japan,  and  China  all  shipments  have 
been  made  from  the  United  States.  The  sales  in  all  these 
countries  have  gradually  increased  and  it  is  becoming- 
apparent  that  the  company  will  soon  find  it  desirable  to 
have  full  stocks  carried  in  each  market.  No  steps  have 
been  taken  in  this  respect,  however,  since  the  managers 
of  the  company  are  undecided  whether  they  should  fol- 
low the  policy  pursued  in  England  and  establish  a 
branch,  or  whether  large  wholesalers  should  be  utilized 
as  exclusive  distributing  agencies.  Since  its  entrance 
into  foreign  trade  eight  years  ago,  the  Nichols  Company 
has  adhered  strictly  to  a  policy  of  not  granting  any  ex- 
clusive agencies,  primarily  because  of  its  desire  to  main- 
tain close  contact  with  its  customers  and  to  study  care- 

*For  references  upon  branch  organization  and  policy,  see  footnote  to 
l^roblcm  109, 


228    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT    • 

fully  any  tendencies  toward  changes  in  the  styles  and 
moclels  of  office  equipment  demanded  in  the  various  mar- 
kets in  which  it  sells. 

Recently  when  the  company  received  an  oft'er  from 
the  firm  of  Perez  y  Orlega,  located  in  Havana,  to  stock 
Nichols  office  equipment  provided  the  company  would 
give  them  the  exclusive  agency  for  the  whole  of  Cuba, 
the  question  of  adhering  to  their  established  policy  was 
raised.  This  Cuban  firm  is  well-established,  and  its  per- 
sonnel has  a  reputation  for  honesty  and  ability.  Its 
salesforce  covers  the  island  of  Cuba  selling  furniture 
and  similar  products.  It  also  carries  a  large  stock  of 
merchandise  in  its  Havana  warehouse.  This  firm  is  de- 
sirable in  every  way  as  a  representative  of  the  Nichols 
C'Ompany,  should  the  latter  decide  not  to  establish  its 
own  branch  in  Cuba. 

As  the  sales  organization  of  Perez  y  Orlega  is  made 
up  of  native  salesmen  who  are  thoroughly  familiar  with 
the  territory  they  cover  and  the  needs  of  their  custom- 
ers, it  should  be  possible  for  this  firm  to  build  up  the 
sales  of  office  equipment  more  rapidly  than  the  Nichols 
Company,  which  at  present  has  only  two  men  operating 
in  the  territory.  Moreover,  because  of  the  demand  for 
longer  credit  terms  on  large  orders  sold  to  foreign  con- 
sumers, the  Nichols  Company  is  not  desirous  of  es- 
tablishing immediately  a  large  warehouse  and  branch 
office  in  Havana. 

Should  Perez  y  Orlega  decide  to  drop  the  Nichols  line 
to  carry  the  office  equipment  of  another  manufacturer, 
the  managers  of  the  Nichols  Company  realize  that  their 
company  would  be  handicapped  considerably.  By  main- 
taining one  of  its  owai  salesmen  in  Cuba,  however,  to  as- 
sist the  salesmen  of  the  agent  in  distributing  the  product, 
some  of  the  drawbacks  of  granting  an  exclusive  agency 
might  be  overcome. 

Should  the  Nichols  Company  accept  the  offer  of  the 
Perez  v  Orlega  firm  to  become  its  exclusive  agent  in 
Cuba? 


DISTRIBUTION   POLICY  229 

Problem  53 

Morrow  Safety  Razor  Company' — 
Manufacturers'  Representatives 

The  distribution  of  the  products  of  the  Morrow  Safety 
Razor  Company  in  Argentina  through  an  exclusive 
agent  and  in  England  through  a  subsidiary  company  had 
worked  out  satisfactorily  and  the  company  was  attempt- 
ing to  formulate  a  sales  policy  to  apply  to  Asia. 

This  company  was  established  about  1900  and  had 
been  successful  in  the  manufacture  and  distribution  of 
a  safety  razor.  The  razor  had  been  extensively  adver- 
tised and  was  used  widely  in  the  United  States,  Europe, 
and  Latin  America.  About  50%  of  the  output  of  the  fac- 
tory was  sold  to  foreign  customers — of  the  foreign  sales 
about  75%  were  with  Europe  and  25%  mth  Latin  Amer- 
ica; The  company  had  always  featured  its  distinctive 
trade-mark  which  had  become  known  in  all  parts  of  the 
world. 

Li  distributing  its  razors  in  Latin  America  the  com- 
pany had  always  relied  on  exclusive  agents.  At  the  be- 
ginning of  each  year  an  estimate  was  made  of  the  prob- 
able sales  in  each  Latin  American  country  and  an  allot- 
ment of  razors  was  made  to  the  exclusive  agent.  The 
agent  was  expected  to  dispose  of  the  allotment  mthin  a 
reasonable  time.  Goods  were  sold  to  the  agent  gener- 
ally on  60  or  90  days'  credit  and  there  was  never  any 
difficulty  in  collection,  the  agents  being  well-established 
and  reliable  houses.  In  the  distribution  of  the  razors  in 
the  local  Latin  American  markets  the  agents  were  al- 
lowed to  follow  their  own  methods — they  could  estab- 
lish local  exclusive  agencies,  could  use  jobbers  or  retail- 
ers, or  any  method  that  in  their  judgment  was  adapted 
to  the  local  market.  Each  agent,  however,  was  required 
to  maintain  a  fixed  retail  price  in  his  market — for  ex- 
ample, in  1921  the  Morrow  safety  razor  sold  throughout 
Argentina  for  4  pesos. 

The  use  of  exclusive  agents  in  Latin  America,  in  the 
judgment    of   the    compan;^^,    was    rendered    absolutely 


230    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

necessary  because  of  the  physical  nature  of  the  country. 
South  America  is  a  country  of  long  distances  and  a 
sparse  population.  Argentina,  for  example,  is  about  one- 
third  as  large  as  the  United  States  and  has  a  popula- 
tion of  about  9,000,000.  Vast  areas  are  uninhabited,  and 
there  are  few  large  cities.  It  appeared  to  the  company, 
therefore,  that  an  exclusive  agency  was  the  best  method 
of  selling  to  such  a  territory  because  the  agent  could 
keep  in  close  touch  with  local  distributors. 

In  England  the  company  distributed  through  subsid- 
iary companies  incorporated  under  the  English  law. 
This  method  Avas  based  upon  the  theory  that  merchan- 
dising conditions  in  England  were  very  similar  to  those 
in  the  United  States. 

Several  years  ago  the  company  faced  the  necessity 
of  formulating  a  sales  policy  for  the  Far  East.*  It  was 
recognized  that  the  conditions  governing  the  methods  of 
selling  were  very  different  from  those  in  the  other  two 
markets.  Population  was  dense  in  the  Far  East — China 
having  a  population  of  400,000,000  and  India  330,- 
000,000.  A  great  part  of  the  population  was  massed  in 
large  cities — Calcutta  having  a  population  of  more  than 
a  million,  and  Canton  a  population  of  1,250,000.  The 
civilization  was  the  oldest  in  the  world  and  the  buying 
habits  of  the  people  were  not  easily  changed.  It  was 
impossible  to  make  a  reliable  estimate  of  possible  sales 
because  of  the  peculiar  shaving  habits  of  the  people. 
The  Chinese,  for  example,  do  not  have  heavy  beards, 
and  the  people  of  India,  while  having  more  hair  on  the 
face  than  the  Chinese,  are  very  proud  of  their  thick- 
flowing  beards.  The  trade-mark,  however,  would  make 
a  strong  appeal  to  the  eastern  people  who  were  more 
attracted  by  pictures  and  symbols  than  by  language  or 
arguments.  Another  factor  was  the  low  i)urchasing 
power  of  the  people.  It  was  pointed  out  that  no  one 
exclusive  agent  could  cover  the  whole  of  China  or  In- 

*Con8ult  numerous  publications  of  the  Dept.  of  Commerce  upon  methodrj 
of  doing  business  with  China  in  connection  with  particular  products.  Cf. 
China;     A  Handbook  by  Juleao  Arnoldj  Commercial  Attache  at  Peking, 


DISTRIBUTION   POLICY  231 

dia  any  more  than  he  could  cover  Latin  America.  It  was 
also  pointed  out  that  to  establish  a  subsidiary  corporation 
would  require  the  creation  of  an  organization  as  large  as 
if  not  larger  than  the  organization  in  the  United  States. 
This  method  would  require  a  large  immber  of  compe- 
tent salesmen  whom  it  was  very  difficult  to  obtain  in  the 
Far  Eastern  territory.  Some  manufacturers  had  found 
it  advisable  to  distribute  their  products  in  the  Far  East 
through  manufacturers'  representatives.  Such  repre- 
sentatives merely  took  orders  which  they  turned  over 
to  the  home  company  on  a  commission  basis.  They  did 
not  carry  any  stocks,  nov  did  they  have  exclusive  rights 
in  the  field,  any  foreign  merchant  being  allowed  to  buy 
direct.  By  adopting  this  method  the  Morrow  Company 
would  ship  direct  to  and  collect  from  the  buyer,  relying, 
however,  upon  the  guarantee  by  the  manufacturer's 
representative  of  the  credit  of  the  buyer.  It  was  also 
considered  doubtful  whether  a  retail  price  could  be 
maintained  in  the  market,  the  retailers  being  so  nu- 
merous and  small  and  conducting  their  business  under 
conditions  so  different  than  those  in  the  western  world 
that  it  would  have  been  impossible  to  exercise  any  con- 
trol over  them. 

What  type  of  distributing  agency  should  have  been 
adopted  for  the  Far  Eastern  markets? 


Problem  54 

The  Murray   Company — Use   of  Wholesalers  as  Agents; 
Wholesale  and  Retail  Agents 

"Should  wholesalers  be  allowed  to  i)urchase  mer- 
chandise outright  or  should  they  ])e  induced  to  act  as 
agents?"  This  is  the  question  facing  the  Murray  Com- 
pany in  the  export  of  braids,  ribboiLs,  laces,  and  fancy 
dress  trimmings  to  Latin  America. 

The  company  originally  intended  to  sell  direct  to 
manufacturers  and  retailers  abroad  through  local 
agents.    Where  possible  nianufacturers'  agents  were  se- 


232    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

cured  to  represent  the  company,  but  the  firm  needed  a 
larger  volume  of  sales  than  this  class  of  representa- 
tives could  give.  Frequently  a  large  wholesale  house 
was  found  to  be  the  most  desirable  distributor  in  a  dis- 
trict. The  company  therefore  adopted  whatever  means 
of  distribution  would  yield  increased  sales  in  that  par- 
ticular locality,  with  the  result  that  today  in  almost 
every  country  in  Latin  America  the  Murray  Company 
has  three  types  of  distributors:  one  group  of  agents 
solicits  orders,  which  are  turned  over  to  the  company 
to  be  filled  by  shipments  made  directly  to  the  customer; 
another  group  of  agents  carries  stocks  of  goods,  but  in- 
forms the  company  of  the  names  of  their  customers  so 
that  the  firm's  salesmen  can  assist  the  agent's  sales- 
men in  securing  orders;  the  third  type  purchases  the 
goods  outright,  refusing  to  inform  the  company  of  the 
names  of  any  of  its  customers. 

From  past  experience  the  Murray  Company  has 
found  that  wholesalers  are  frequently  not  interested  in 
pushing  the  sale  of  Murray  goods  or  of  featuring  the 
Murray  brand.  "When  a  wholesaler  buys  his  merchan- 
dise, the  company  has  no  idea  of  the  customers  to  whom 
he  sells.  Often  he  buys  on  a  price  basis  and  is  willing 
to  shift  his  line  at  the  persuasion  of  a  -rival  salesman 
or  at  the  first  opportunity  to  make  larger  profits.  This 
practice  of  foreign  importers  and  wholesale  houses,  be- 
cause of  its  constant  recurrence,  is  causing  the  officials 
of  the  Murray  Company  serious  alarm. 

When  an  agent  can  be  induced  to  carry  a  stock  of  mer- 
chandise and  at  the  same  time  to  give  the  company  the 
names  of  his  customers  so  that  its  salesmen  can  assist 
him  in  disposing  of  the  product,  the  most  satisfactory 
results  have  been  achieved.  Such  an  agent  is  unwilling 
to  change  his  line,  for  he  realizes  that  the  Murray  Com- 
pany is  in  position  to  go  directly  to  the  trade  to  secure 
its  sales  if  necessary.  This  firm  has  no  intention  of 
dealing  with  foreign  customers  except  through  the  ser- 
vices of  its  agents.  However,  a  number  of  foreign  whole- 
salers who  have  heard  of  the  methods  of  some  American 


DISTRIBUTION    POLICY  233 

manufacturers  are  suspicious  of  any  attempt  on  the 
part  of  the  Murray  Company  to  learn  the  identity  of 
their  customers,  fearing  it  may  be  planning  to  discon- 
tinue the  use  of  the  middleman  in  foreign  markets  as 
others  are  doing  in  the  domestic  market.  It  is  doubt- 
ful whether  these  wholesalers  could  be  induced  under 
any  conditions  to  give  the  firm  a  list  of  the  dealers  to 
whom  they  sell  the  Murray  products.  The  only  appar- 
ent way  in  which  the  company  could  learn  the  identity 
of  its  customers  would  be  to  abandon  distribution 
through  most  of  these  wholesalers  and  to  secure  new 
agents.  Because  of  the  hostility  which  would  undoubt- 
edly be  aroused,  the  company  is  averse  to  taking  this 
step,  yet  without  the  use  of  the  aggressive  selling  meth- 
ods of  its  own  salesmen  assisted  by  these  wholesalers, 
the  Murray  Company  cannot  secure  the  highest  returns 
from  at  least  one-third  of  the  foreign  consumers  of  its 
product. 

Furthermore,  it  has  developed  that  a  number  of 
agents  of  the  Murray  Company  are  operating  retail 
stores  either  in  connection  with  the  central  office  of  the 
company  or  at  one  or  more  points  in  the  territory  for 
which  they  have  been  granted  exclusive  agencies.  As 
retailers  these  agents  thus  become  competitors  of  other 
retailers  in  the  district,  to  whom  the  Murray  Company 
desires  its  goods  to  be  sold.  On  the  other  hand,  an  ex- 
amination of  the  records  of  the  Murray  Company  shows 
that  some  of  the  most  aggressive  agents  are  those  who 
are  also  retailers,  apparently  signifying  that  while  the 
market  may  be  narrowed  in  the  immediate  vicinity  of 
the  wholesaler's  retail  store  that  inHuence  does  not  ex- 
tend very  far  and  the  general  ability  and  aggressive- 
ness of  the  wholesaler  offset  any  detrimental  influence. 
In  other  cases  there  seems  good  reason  to  believe  that 
the  wholesaler  is  paying  more  attention  to  his  i-etail 
stores  than  to  the  distribution  of  products  at  wholesale 
to  the  retailers  in  his  territory.  The  Murray  Com- 
pany's salesmen  have  not  infrequently  reported  that 
retailers  in  the  territories  of  such  agents  hnve  abso- 


234    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

lutely  refused  to  handle  the  company's  goods,  because 
they  felt  that  the  agent  as  exclusive  agent  could  pur- 
chase at  a  much  lower  price  than  they  and  they  were 
not  interested  in  purchasing  goods  from  a  competitor. 

Should  the  present  agency  policy  of  the  Murray  Com- 
pany be  modified? 


Problem  55 

Modern  Oil  Company — Question  of  Giving  up 
Native  Agents  in  China 

In  selling  lighting  and  fuel  oil  in  China  through  local 
CJhinese  agents  the  ]\Iodern  Oil  Company  feels  that  it  is 
not  keeping  in  close  touch  with  Chinese  customs,  buy- 
ing habits,  and  the  demands  of  the  trade,  since  com- 
petitors who  have  established  their  own  branches  and 
salesmen  in  the  Chinese  market  appear  to  be  securing 
the  larger  proportion  of  the  business.  Local  Chinese 
agents  frequently  are  content  to  sell  oil  in  the  old  way, 
filling  the  orders  that  come  in  but  not  taking  the  trouble 
or  pains  to  interest  new  customers  in  buying  Modern 
oils  or  trying  to  increase  their  use  through  better  sales- 
manship. 

The  company  adopted  this  method  of  distribution  be- 
cause in  the  beginning  its  finances  would  not  permit 
the  building  up  of  a  large  organization  of  American 
salesmen  to  represent  it  in  China.  Tt  would  have  been 
extremely  difficult,  in  fact,  to  find  men  with  sufficient 
knowledge  of  the  Chinese  customs  and  language  to  per- 
mit them  to  go  into  the  foreign  field  immediately  and  the 
company  did  not  care  to  leave  tlie  market  open  to  com- 
petitors until  such  time  as  it  could  have  a  force  properly 
trained.  By  using  Chinese  agents  the  company  has  se- 
cured fairly  widespread  distributiori,  but  it  is  now  in- 
terested in  increasing  its  sales  in  the  territory  in  which 
it  is  already  represented. 

At  present  the  company  is  in  a  position  to  devote  to 
the  development  of  this  part  of  the  foreign  field  a  suf- 


DISTRIBUTION   POLICY  235 

ficiently  large  amount  of  capital  to  permit  the  training 
of  at  least  a  few  men  to  take  up  the  work  of  the  Chinese 
agents.  The  new  salesmen  would  need  a  training 
period  of  about  a  year  or  a  year  and  a  half  before  they 
could  be  sent  out  to  the  Far  East  on  their  own  respon- 
sibiHty.  Because  of  its  lack  of  capital  and  the  difficulty 
of  securing  enough  capable  men  willing  to  undertake 
such  a  course,  the  company  could  not  hope  to  secure 
and  train  enough  men  to  supplant  all  its  Chinese  agents 
for  several  years  to  come.  It  has  not  been  decided, 
therefore,  whether  the  Modern  Company  should  under- 
take to  train  a  group  of  salesmen  with  the  idea  of  grad- 
ually replacing  its  Chinese  agents  or  whether  it  should 
use  its  capital  in  training  travelers  who  would  study  and 
be  in  close  touch  with  the  market  at  all  times  and  who 
would  devote  at  least  a  part  of  their  time  to  training 
native  Chinese  agents  in  the  best  methods  of  selling  Mod- 
ern Company  oils. 


Problem  56 

Bennett  Manufacturing  Company — Exclusive  Agency* 

The  firm  of  Alvaredo  &  Lopez,  a  reputable  and  long- 
established  wholesale  house  in  Mendoza,  Argentina,  has 
recently  offered  to  become  the  exclusive  agency  for  the 
line  of  builders'  hardware  made  by  the  Bennett  Manu- 
facturing Company.  Heretofore  this  wholesale  house 
has  been  scattering  its  purchases  but  has  bought  approx- 
imately $25,000  worth  of  materials  each  year  from  the 
Bennett  Company.  This  firm  estimates  that  if  it  were 
granted  an  exclusive  agency  it  would  sell  at  least  $200,- 
000  worth  of  builders'  hardware  the  first  year,  and 
could  probably  increase  this  amount  in  the  future.  In 
return  for  stocking  this  manufacturers'   line   the  firm 

*See  Miscellaneous  Series  No.  81,  Chap.  V,  and  the  two  following  articles 
in  The  World's  Marlets:  August  1919,  "How  to  Select  an  Exclusive  Export 
Agent";  and  Oct.  1919,  "How  to  Secure  Export  Agents." 


236    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

of  Alvaredo  &  Lopez  asks  that  it  ))('  allowed  to  have  $25,- 
000  worth  of  material  on  open  account. 

The  reputation  of  this  Mendoza  house  is  excellent. 
Its  business  is  small,  but  growing  rapidly  and  the  pro- 
prietors are  energetic  and  progressive.  This  firm  has 
been  importing  merchandise  from  the  United  States  for 
the  past  eight  years  and  is  well  liked  by  the  manufac- 
turers vdih  whom  it  has  dealt,  as  well  as  by  the  trade 
in  Mendoza.  In  all  probability  it  can  sell  the  amount 
of  builders'  hardware  which  it  estimates. 

The  Bennett  Manufacturing  Company,  located  in  New 
England,  has  an  export  business  in  the  Argentine  of 
some  $600,000  each  year.  The  business  is  secured  mainly 
from  firms  located  in  the  cities  of  Buenos  Aires,  Bahai 
Blanca,  Rosario  and  Mendoza.  At  present  about  $120- 
000  worth  of  business  comes  from  the  latter  city.  In 
carrying  on  its  foreign  trade  the  Bennett  Company 
deals  through  its  own  salesforce  or  exclusive  agents, 
whichever  means  appears  to  bring  in  the  greatest  amount 
of  business. 

Although  an  increase  in  export  business  in  Mendoza 
of  $40,000  a  year  would  probably  result  if  an  exclusive 
agency  were  granted  the  firm  of  Alvaredo  &  Lopez, 
there  are  a  immber  of  disadvantages  to  be  considered. 
In  the  first  place,  there  are  sixteen  importers  of  build- 
ers' hardware  in  this  city.  If  an  exclusive  agency  is 
given  to  one  of  these  wholesalers  the  ill-will  of  the  other 
fifteen  will  be  aroused  and  the  Bennett  Company  might 
have  a  hard  time  increasing  its  sales  in  the  face  of  the 
opposition.  Furthermore,  there  is  some  danger  of  a 
wholesaler  securing  the  exclusive  agency  of  a  line  of 
builders'  hardware  for  the  purpose  of  preventing  its 
increased  sales  by  failing  to  give  his  best  efforts  to  the 
distribution  of  this  product  and  by  keeping  other  whole- 
salers from  doing  so  through  his  rights  of  exclusive 
agency.  It  would  be  difficult  to  compel  such  a  wholesaler 
to  push  the  line  if  he  saw  an  opportunity  to  make  more 
money  through  other  manufacturers  by  keeping  these 
goods  on  his  shelves. 


DISTRIBUTION   POLICY  237 

Another  point  to  be  considered  is  the  future  deveh:)p- 
ment  in  this  region.  The  business  of  the  Bennett  Com- 
pany in  Mendoza  has  l)een  increasing  at  about  11%  a 
year  and  bids  fair  to  continue  this  rate  of  growth.  Al- 
though the  annual  sales  of  ^200,000  worth  of  merchan- 
dise would  be  a  substantial  increase  over  the  present 
amount  of  Bennett  Company  goods  sold  in  Mendoza, 
after  a  few  years  it  is  probable  that  more  business 
would  be  secured  through  selling  to  a  majority  of  the 
wholesalers  in  this  city  rather  than  to  only  one.  But 
if  an  exclusive  agency  were  granted  for  only  a  short 
period  of  time,  it  is  doubtful  if  Alvaredo  &  Lopez  would 
push  the  sale  of  Bennett  Company  goods. 

Should  an  exclusive  agency  be  granted  the  firm  of  Al- 
varedo &  Lopez? 


Problem  57 

Hartman  Piano  Company — Securing  Agency  for  Pianos 

^he  Hartman  Piano  Company,  located  in  a  New  Eng- 
land manufacturing  city,  has  a  large  domestic  distribu- 
tion of  its  pianos,  and  in  1919,  undertook  the  develop- 
ment of  its  foreign  business.  It  sought  the  services  of 
its  New  York  bank  in  getting  references  of  desirable 
agents  in  South  American  countries.  The  bank  offered 
the  ser\'ices  of  its  branch  in  Rio  de  Janeiro  to  obtain 
an  agent  for  the  Hartman  Company  by  personal  solici- 
tation. In  accordance  with  this  offer  the  Hartman  Com- 
pany sent  its  catalogs  and  price  lists  to  the  bank's 
branch  manager,  who  began  a  systematic  search  for  a 
desirable  dealer  for  Hartman  pianos. 

The  Hartman  Company  owns  and  controls  the  Rex 
Piano  Company,  which  produces  a  piano  of  grade  equal 
to  the  Hartman.  The  catalogs  and  price  lists  for  Rex 
pianos  were  also  sent  to  the  Brazilian  branch  of  the 
bank.^ 


238    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

For  several  months  the  Hartman  Company  received 
no  word  from  Eio  de  Janeiro  as  to  the  success  of  the 
bank's  branch  in  securing  an  agent. 

In  July,  1919,  ]\Ir.  Randolph,  a  relative  of  the  presi- 
dent of  the  Hartman  Company,  planned  a  trip  to  sev- 
eral South  American  countries.  The  president  felt  dis- 
appointed at  the  absence  of  a  report  from  the  bank  and 
asked  his  kinsman  to  look  into  the  possibilities  of  the 
Brazilian  market,  and  if  possible,  to  secure  an  agent. 
The  management  of  the  Hartman  Company  did  not  no- 
tify the  bank  of  this  action. ) 
(On  September  25  the  Hartman  Company  received  a 
cable  from  Mr.  Randolph  advising  that  he  had  arranged 
with  Enrique  Teixeira  of  Rio  to  represent  the  Hartman 
Company  in  the  sale  of  Rex  pianos.  The  cable  con- 
tained an  initial  order  for  three  pianos  to  be  built  ac- 
cording to  regular  standard  pattern,  without  alteration 
in  design,,  and  was  confirmed  by  the  follomng  letter 
from  Mr.  Randolph: —  * 

"An  investigation  of  this  market  indicates  a  scarcity  of  pianos 
at  the  present  time,  but  a  desire  for  European  makes  in  prefer- 
ence to  American.  After  conferring'  with  a  number  of  dealers 
I  was  able  to  persuade  Mr.  Teixeira  to  place  an  initial  order  for 
three  Rex  pianos  to  be  built  according  to  regular  standard  pat- 
tern, without  alteration  of  design  or  finish.  In  my  opinion  a  good 
business  can  be  developed  for  these  pianos  in  standard  design. 
This  first  order  is  simply  to  convince  Mr.  Teixeira  that  he  can 
market  the  pianos.  He  is  in  a  position  to  dispose  of  a  large  num- 
ber of  instrnments  becanse  he  is  one  of  the  largest  and  strongest 
dealers  in  Brazil,  and  a  very  desirable  agent.  You  will  note 
that  Mr.  Teixeira  has  agreed  to  terms  of  90  days  sight  draft  with 
documents  attached,  although  the  terms  nsually  gi-anted  by 
European  firms  are  much  more  generous.  I  feel  that  the  will- 
ingness of  Mr.  Teixeira  to  accept  these  terms  is  due  more  than 
anything  else  to  an  acquaintance  that  I  sti-uck  up  with  his  rela- 
tives on  the  ship  coming  down.  I  hope  therefore  that  you  will 
be  able  to  give  this  order  your  best  attention." 

(The  bank  was  notified  of  the  receipt  of  the  cable  and 
was  asked  if  anything  had  been  heard  from  its  Rio 
branch  regarding  the  appointment  of  an  agent.  As 
nothing  had  been  heard  up  to  this  time  it  was  thought 


DISTRIBUTION   POLICY  239 

advisable  to  offer  the  Hartman  Company  an  arrange- 
ment for  financing  the  business  with  Mr.  Teixeira.  This 
relieved  the  disappointment  of  the  piano  company  over 
the  failure  of  the  bank  to  obtain  an  agent.  ) 
(On  September  29  the  New  York  bank  received  a  letter 
from  its  branch  in  Rio,  which  was  dated  August  18. 
The  following  extract  is  taken  from  the  letter : ) 

"In  accordance  with  your  instructions  regarding  the  Hart- 
man  Company,  I  have  canvassed  the  field  for  pianos  in  Brazil  and 
have  found  that  there  is  a  great  scarcity  of  these  musical  in- 
struments at  the  present  time,  I  have  talked  with  a  number  of 
piano  dealers  with  a  view  to  placing  the  agency  for  Hartman 
pianos  in  this  market.  I  have  seen  the  firm  of  Valencia  &  Com- 
pany and  had  a  long  talk  with  the  manager,  but  they  were  not 
interested  in  the  agency. 

' '  I  have  taken  as  next  choice  the  firm  of  Joao  Magalhaes.  I  had 
a  long  talk  with  Mr.  jNIagalhaes,  a  gentleman  who  has  been  in 
this  business  for  a  good  many  years.  He  told  me  that  he  had 
already  bought  some  American  pianos,  but  that  he  had  not  the 
agency  for  any  firm  in  the  States.  vThe  American  pianos,  he  said, 
are  not  as  nicely  finished  as  the  French  or  German  pianos?)  He 
showed  me  some  of  the  French  pianos  manufactured  by  Gaveau 
of  Paris  and  these  pianos  really  showed  a  better  finish,  especially 
on  the  outside.  European  manufacturers  go  so  far  as  to  cover 
the  back  of  the  piano  with  some  expensive  silks  or  satins.  Mr. 
Magalhaes  has  been  obliged  to  do  this  himself  with  the  Ameri- 
can pianos  he  has  received.  (However,  he  feels  that  the  quality 
of  the  Hartman  and  Rex  pianos  is  good  and  is  confident  that 
they  will  find  a  ready  sale  in  this  market  if  certain  changes  in 
design  were  made.  He  has  given  me  an  order  for  seventy-five 
pianos,  to  be  shipped  at  the  rate  of  six  to  ten  a  month,  on  condi- 
tion that  the  company  make  alterations  as  indicated  on  the  order, 
and  ship  the  pianos  with  180  days  draft  attached,  renewable 
with  the  consent  of  our  bank  up  to  one  year's  time.]  The  pianos 
he  selected  for  each  monthly  shipment  are  as  f ollo^^'^ : 

2  Rex,  Model  No.  43 

3  Hartman,  Model  No.  47 

3  Hartman  "A"  Grand,  Model  No.  56 

\^He  wants  these  pianos  packed  in  zinc-lined  cases,  and  he 
agrees  to  pay  the  extra  charge  that  this  will  entaiUMr.  Magalhaes 
has  given  me  some  catalogs  of  Pleyel  and  Gaveau,  and  in  show- 
ing me  these  catalogs,  as  well  as  the  European  pianos  them- 


240    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

selves,  he  emphasized  the  fact  that  the  pianos  made  by  Hartman 
are  too  flat  to  be  attractive.  He  wants  the  upright  piano  to  be 
modified  so  that  the  front  board  will  have  one  or  two  panels,  as 
sketched  in  the  enclosed  book. 

"Please  bear  in  mind,  and  this  is  very  important,  that  Mr. 
Magalhaes  is  in  the  habit  of  getting-  drafts  from  European  manu- 
facturers drawn  up  to  360  days,  without  interest ;  or  he  receives  a 
discount  of  3%,  for  paying  cash,  all  expenses  of  collections, 
stamps,  etc.,  for  the  account  of  the  manufacturer.  The  order 
sent  by  Mr.  Magalhaes  is  enclosed  in  this  letter. ' ' 

\Upon  receipt  of  this  letter  the  New  York  bank  sent  a 
copy  to  the  Hartman  Piano  Company. 

What  action  should  have  been  taken  by  the  Hartman 
Company  upon  receipt  of  this  letter  from  the  bank? 
Should  the  Hartman  Company  have  sought  the  Brazilian 
agent  through  two  sources  in  this  wayfl 

Problem  58 
Rand  Smith  &  Company — Granting  Agencies 

Early  in  1918,  Rand  Smith  &  Company,  a  large  New- 
York  wholesale  cotton  goods  firm,  received  almost  si- 
multaneously requests  for  agencies  exclusive  in  that 
market  from  two  dry  goods  merchants  in  Rio  de  Janei- 
ro, Jose  Garcia  &  Company  and  Boucas  Brothers.  In 
the  correspondence  that  developed  both  firms  were  able 
to  demonstrate  a  wide  acquaintance  among  the  dry 
goods  merchants  of  their  country  and  an  ability  to  mar- 
ket goods.  Both  washed  to  place  initial  orders  for  cus- 
tomers of  about  $15,000. 

Rand  Smith  &  Company  were  desirous  of  establishing 
a  good  connection  in  Brazil.  Prior  to  this  time  they  had 
carried  on  an  export  business  with  that  country  but 
had  been  forced  by  war  contracts  to  give  it  up  tempo- 
rarily, and  at  that  time  lost  their  former  agents.  The 
company  was  now  in  a  position  to  fill  the  orders  sent  by 
either  one  of  the  prospective  agents.  The  management 
was  desirous,  however,  of  making  a  wise  choice  so  as  to 
secure  an  agent  who  would  look  out  for  their  interests 
as  well  as  those  of  the  Brazilian  merchants  whom  they 


DISTRIBUTION   POLICY  241 

were  to  represent.  The  company  would  be  forced  to  de- 
pend more  or  less  upon  the  recommendations  of  its 
agent  in  granting  credit  to  any  South  American  cus- 
tomers. References  were  sought  concerning  these  two 
firms  from  the  company's  bank,  which  had  a  branch  at 
Rio. 

The  information  submitted  by  the  branch  bank  con- 
sisted of  reports  of  investigations  by  its  own  credit  de- 
partment and  of  reports  by  a  commercitd  credit  agency. 
The  information  outlined  below  was  given  concerning 
Jose  Garcia: 

"Trade  Reports 

No.  1 — 'Very  good  firm  from  whom  we  buy.' 

No.  2 — 'Very  good  firm.' 

No.  3 — 'We  have  known  him  for  a  number  of  years  as  repre- 
sentative of  North  American  manufacturers.  Morally  and 
financially  well-regarded.  Firm  deals  with  us  against  de- 
livery of  documents.'  " 

"Bank  Reports 

No.  1 — 'Old  client  of  ours.  Very  active  and  hardworking.  He 
has  represented  North  American  firms  and  believe  his  net 
worth  to  be  some  1,000,000$000  (paper  milreis).  He  owns  real 
estate  in  this  city,  and  we  grant  him  a  credit  of  15.000$000  to 
20,000$000  (Brazilian  paper)  in  current  account.' 

No.  2.— 'Capital  1,200,000$000  (Brazil  paper).  Credit  50,- 
000$000  (Brazilian  paper)  in  current  account.  Good  moral 
standing. ' 

No.  3. — 'We  understand  he  represented  the  American  Cotton 
Goods  Company,  from  whom  he  received  $120,000  (gold)  when 
he  left  them.  We  have  no  other  details.  He  is  not  a  client  of 
ours.  Five  other  local  banks  said  that  they  did  not  know  him 
as  a  credit  seeker.' 

Comments :  According  to  his  signed  statement  of  October  15, 
1918,  his  net  worth  is  some  1,800,000$000  (Brazilian  paper), 
consisting  mostly  of  real  estate." 

Commercial  Agency  Report  Dated  January  15,  1918 : 
' '  Jose  Garcia  is  a  Spaniard ;  married ;  some  44  years  of  age ; 
a  resident  of  this  country  for  many  years,  and  in  business  since 


242    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

quite  young.  He  has  been  a  member  of  several  concerns,  the  last 
being  Mestre,  Diez  &  Company,  wholesale  clothiers,  in  which  he 
was  a  special  partner,  with  an  interest  of  100,000$000.  He  re- 
tired from  that  firm  at  the  beginning  of  1916,  his  capital  with 
profits  amounting  to  140,000$000  exclusive  of  interest.  When 
he  ceased  to  take  an  active  part  in  the  business  he  made  a  trip  to 
the  United  States,  where  he  secured  a  number  of  representa- 
tions, and  for  a  time  thereafter  he  exploited  these  in  his  own  name 
until  October,  1916,  when  he  transferred  his  representation 
business  to  a  subsidiary  company  organized  by  Morton  &  Com- 
pany of  New  York,  a  large  financial  firm,  under  contract  extend- 
ing for  5  years  from  October  1,  1916.  Garcia  was  named  general 
director  of  the  business  in  Brazil  and  his  operations  were  made 
to  extend  to  certain  other  South  American  countries.  For  one 
3'ear  Garcia  represented  this  subsidiary,  receiving  a  salary  of 
$20,000  (gold)  per  annum,  and  one-third  of  the  profits.  In 
September,  1917,  he  resigned  from  the  company  and  has  since 
been  working  in  his  own  name. 

"He  is  known  as  a  buyer  and  is  a  seeker  of  credit  accommo- 
dations. He  has  had  long  experience  in  this  market,  is  very 
capable  and  is  looked  upon  as  a  careful  and  shrewd  merchant 
who  gives  his  business  alfairs  his  close  and  undivided  attention, 
and  the  opinion  is  expressed  that  the  interests  of  his  principals 
will  be  properly  cared  for."  Houses  consulted  in  the  United 
States  at  the  time  of  this  report  said : 

"No.  1— 'He  is  our  agent  in  Buenos  Aires.  We  have  the  best 
of  references  about  him ;  he  is  a  bright,  experienced  business  man, 
who  is  in  very  good  financial  circumstances.  Besides  the  dry 
goods  line  he  also  engages  in  other  articles  and  is  doing  very 
well.  While  we  do  not  extend  credit  to  him,  because  he  does  not 
seek  it,  we  recommend  and  consider  him  good  for  his  engage- 
ments. ' 

"No.  2 — -'We  do  not  sell  this  man,  though  he  was  at  one  time 
our  salesman. ' 

"No.  3 — 'He  was  our  agent  in  Rio  until  about  two  years  ago, 
selling  goods  for  us  on  commission.  We  charged  nothing  to 
him,  and  have  no  information  as  to  liis  financial  res])onsibility 
and  debt  paying  reputation.' 

"No.  4 — 'We  severed  all  connections  about  a  year  ago.' 
"No.  5 — 'Our  experience  with  this  man  was  in  the  character  of 
a  selling  agent,  and  as  we  were  not  quite  satisfied  with  results  ob- 
tained, we  severed  connection.'  " 

Rand  Smith  &  (yompaiiy  soug-ht  information  concern- 
ing this  man  direct  from  American  houses,  whom  he  had 
represented  and  received  the  follo\\'ing  replies: 


DISTRIBUTION   POLICY  243 

"No.  1 — 'The  Americai]  Cotton  Goods  Company — Garcia  was 
our  agent  in  Rio  and  while  he  was  an  excellent  salesman  and 
obtained  a  great  deal  of  business,  we  do  not  think  his  dealings 
with  us  were  entirely  straight  and  we  bought  off  his  contract 
with  us.' 

''No.  2 — 'Garcia  represented  ns  in  South  iVmerica  and  we  con- 
sidered him  a  very  able  man,  with  some  means.  We  had  no 
actual  proof  but  toward  the  last  of  our  business  relations  so 
many  suspicious  circumstances  arose  that  we  terminated  our 
relationship  with  him.  While  reiterating  the  fact  that  we  had 
nothing  tangible  on  which  to  base  our  opinion,  it  is  our  feeling 
that  in  the  event  of  any  castastrophe  Mr.  Garcia  would  never 
be  the  person  to  lose  money. ' 

"No.  3— 'Mr.  Garcia  was  our  agent  in  Rio  for  several  years  prior 
to  1914.  He  demonstrated  ability  as  a  salesman,  and  on  the 
whole  our  relations  with  him  were  favorable.  We  never  ex- 
tended credit  to  him  since  he  did  not  ask  it. '  ' ' 

The  braiicli  bank  reports  upon  the  firm  of  Boucas 
Brothers  are  given  below: 

"Trade  Reports 

Business  agents  for  Dry  Goods. 

Nationality — Turkish. 

"No.  l-'Capital  750,000$000  (Brazilian  paper).  In  former 
times  they  used  to  buy  from  us.  They  have  always  treated  us 
fairly  and  we  have  a  good  opinion  of  their  moral  character. ' 

"No.  2 — 'They  did  very  little  business  with  us,  but  we  have 
good  reports  on  them.  Recently  they  received  a  consignment 
through  us  Avorth  40,000$000  (paper)  against  bills  at  five 
months,  which  they  lifted  punctually  when  due.  They  are  very 
rich  and  have  an  excellent  reputation. ' 

"No.  3 — 'Old  clients  to  whom  we  have  assigned  credit  of  10,- 
000$000  (paper),  but  they  usually  discount  their  purchases. 
They  are  very  reliable  and  hardworking,  and  we  have  a  very 
good  opinion  of  them.' 

"No.  4 — 'Clients  of  many  years  standing,  and  very  good  moral 
character.    Pay  well.    We  do  not  know  their  capital.' 

"No.  5— 'We  used  to  allow  them  facilities  up  to  20,000$000  (pa- 
per), but  they  have  not  bought  anything  from  us  for  a  long 
time,  sine?  they  have  changed  the  nature  of  their  business  to 
become  agents  and  importers.'  " 


244    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

' '  Bank  Reports  : 

''No.  1 — 'They  are  said  to  be  tricky  and  it  is  best  to  be  cautious 
when  dealing  with  them  and  arrange  everything  very  clearly. 
They  do  not  work  with  us. ' 

"No.  2— 'Capital  as  by  balance  sheet  30th  of  June,  750,000$000 
(Brazilian  paper).  Credit  75,000^000  (Brazilian  paper)  single 
name  and  50,000$000  (Brazilian  paper)  in  current  account. 
Good  reports.' 

"No.  3— 'Capital  as  per  deed  of  partnership— 500,000$000  (Bra- 
zilian paper).    Fay  punctually.'  " 

The  report  of  the  commercial  agency  gave  the  fol- 
lowing information : 

Commercial  Agency  Report  Dated 
December  10,  1917. 

"The  partners  composing  this  firm  are  brothers;  some  31  to 
36  years  of  age.  The  firm  came  into  force  on  the  first  of  Novem- 
ber, 1909,  when  they  started  at  Rua  Castanheira  93,  prior  to 
which  they  had  both  been  working  as  peddlers.  They  had  also 
a  branch  at  one  time  at  Sao  Paulo,  but  this  was  liquidated  in 
order  to  extend  their  Rio  business.  They  are  now  operating  un- 
der contract  for  a  period  of  ten  years,  dating  from  January  1, 
1916,  with  a  stipulated  capital  of  300,000$000,  contributed  equal- 
ly by  the  partners,  both  having  the  use  of  the  signature  and 
dividing  profits.  They  still  own  the  property  in  Sao  Paulo,  for- 
merl}^  occupied  by  the  branch  which  has  been  closed.  In  July 
last  they  claimed  to  have  sold  since  January  1 — 1,200,000$000, 
largely  as  agents  for  Brazilian  dealers,  but  investigations  at  that 
time  showed  that  they  were  buying  very  heavily  on  their  own 
account  and  in  much  larger  quantities  than  before,  but  notwith- 
standing this  they  continued  to  pay  satisfactorily." 

Rand  Smith  &  Company  were  able  to  get  reports  from 
two  North  American  firms  with  whom  Boucas  Brothers 
had  formerly  done  business.  A  digest  of  their  reports 
is  given  below: 

No.  1— The  Northern  States  Cotton  Company  stated  that  up  to 
1916  they  had  done  business  with  this  concern,  selling  them  in 
part  on  their  account,  whereas  in  most  transactions  Boucas 
Brothers  acted  simply  as  agents.  For  that  merchandise 
which  Boucas  Brothers  purchased  for  themselves  they  extended 
a  90  day  credit.  All  payments  wei'e  made  satisfactorily  but  the 
management  felt  that  in  certain  cases  where  the  South  American 
firm  had  acted  as  agents,  they  had  given  better  representation 


DISTRIBUTION   POLICY  245 

to  their  South  American  buyers  than  they  had  to  the  American 
manufacturer  in  cases  where  differences  arose. 
No.  2 — The  Connecticut  Manufacturin.y-  Company  stated  that 
up  to  1914  they  had  sohl  fair  sized  orders  through  Boucas 
Brothers,  who  were  actini;  as  their  accents  in  Rio.  At  the  out- 
break of  the  European  War  several  larg-e  orders  with  the  con- 
cern were  cancelled  without  any  explanation,  nor  could  they  get 
an  answer  from  them.  Their  relations  were  broken  at  the  time, 
nor  had  they  had  any  dealings  with  them  since. 

Which  of  these  firms  should  Rand  Smith  &  Com- 
pany have  chosen  as  agent!  What  should  have  been 
included  in  the  Brazilian  agency  contract! 


Problem  59 

Mathews  &  Wolfe  Company — Exclusive  Agency 
AND  Advertising  * 

The  Mathe\vs  &  AVolfe  Company  of  Philadelphia  car- 
ries on  a  large  business  in  spices  and  extracts  in  the 
United  States.  In  1916,  the  firm  sought  to  enlarge  its 
sales  b}^  exports  to  Latin  American  countries  as  well  as 
to  other  foreign  markets.  In  securing  foreign  agents 
in  the  various  countries  the  management  utilized  the 
services  of  the  foreign  commercial  department  of  a  large 
New  York  bank.  Samples  and  price  lists  were  sent  to 
foreign  correspondents  and  branches  of  the  bank,  among 
them  to  the  branch  in  Buenos  Aires. 

On  July  15,  the  New  York  bank  received  a  cable  from 
its  Argentine  representative  stating  that  the  agency  for 
Mathews  &  Wolfe  products  had  been  offered  to  Jose 
Garate.  After  consulting  with  the  American  firm,  the 
bank  cabled  to  its  representative  to  hold  up  granting 

*For  infornuition  upon  the  use  of  dealer  lielps,  see  Vedder,  American 
Methods  in  Foreign  Trinle,  Chap.  XVII;  ]\Iahony,  The  Export  Salesman, 
(Business  Training  Corp.),  Cliap.  V;  also  Printers'  Inlc,  Feb.  26,  1920,  p. 
97 — "Horse  Sense  in  Foreign  Advertising";  and  the  following  articles  in 


246    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

an  exclusive  agency  until  further  notice.  Through  the 
bank  channels  the  prospective  agent  sent  to  Mathews 
&  AYolfe  the  following  letter  which  explains  the  trans- 
action up  to  that  point: — 

"The  foreign  service  department  of  the  bank  has  had  the 
kindness  to  submit  ns  your  general  lines  of  samples,  catalog, 
and  price  list,  of  the  articles  manufactured  by  you,  and  at  the 
same  time  asked  us  if  we  would  be  interested  in  the  handling 
of  said  articles  for  the  Argentine  Republic. 

"After  gathering  the  opinions  of  some  of  the  importers  and 
specialists  of  these  articles,  who  are  at  the  present  time  engaged 
in  the  sale  of  similar  European  articles,  we  believe  it  would 
prove  of  interest  to  you  as  well  as  ourselves,  since  we  can  see 
the  possibility  of  placing  large  quantities  of  your  products 
amongst  our  many  commercial  connections  in  this  city  and  in 
the  interior  of  the  country,  provided  the  terms  you  give  us  agree 
with  our  wishes  and  our  point  of  view. 

"To  this  effect,  and  in  order  to  clear  up  first  these  points,  and 
also  some  doubts  that  we  have  regarding  prices  and  supple- 
mentary conditions  to  be  conceded  to  our  purchasers,  we  have 
asked  the  commercial  department  to  kindly  transmit  the  follow- 
ing cable : — 

'HAVE  OFFERED  THE  AGENCY  OF  MATHEWS 
AND  WOLFE  TO  JOSE  GARATE  CABLE  IF 
AGREEABLE  HAVE  ALREADY  SOLD  ONE  HUN- 
DRED SEVENTY  CASES  OF  MUSTARD  MORE 
ORDERS  ON  WAY  CABLE  IF  SELLING  ON 
APRIL  PRICE  LIST  SATISFACTORY  WILL  YOU 
GRANT  FIVE  PER  CENT  COMMISSION  ON  SAME 
SEND  SMALL  CASE  OP  SAMPLES  MUSTARD 
CANS  CARTONS  AND  TUMBLERS  TO  SI^BMIT 
FOR  GOVERNMENT  ANALYSIS  SEND  A  POWER 
OF  ATTORNEY  TO  REGISTER  TRADE-MARK 
GOOD  PROSPECTS  IN  THIS  MARKET' 

"By  your  reply,  also  received  through  the  medium  of  the 
same  department  under  date  of  August  17,  stating  i-esults : — 

'BELIEVE  MATHEWS  &  WOLFE  AGREEABLE 
JOSE  GARATE  HANDLE  GOODS  ON  FIVE  PER 
CENT  COMMISSION  CLOSE  NO  EXCLUSIVE 
AGENCY  NOW  WILL  PROTECT  APRIL  PRICES 
ON  ALL  SALES  COMPLETED  FUTURE  ORDERS 
SUBJECT  TO  PRICES  RULING  DATE  OF  SHIP- 
MENT SENDING  SAMPLES  AND  POWER  OF 
ATTORNEY' 


DISTRIBUTION    POLICY  247 

"I  see  that  you  do  not  authorize  as  yet  the  New  York  bank 
to  confirm  to  us  the  exclusive  representation  of  your  esteemed 
house  for  the  Plate  Republics,  which  is  one  of  the  prime  condi- 
tions necessary  and  which  we  ask  for  in  order  to  formally  handle 
your  business. 

"Our  request  to  be  your  exclusive  agents  in  the  Argentine 
Republic  is  based  on  multiple  reasons  that  are  worth  considera- 
tion. We  might  remind  you  that  on  our  part  we  will  have  to 
battle  with  all  kinds  of  difficulties  in  order  to  introduce  into 
this  market  a  new  and  unknown  brand,  which  will  have  to 
compete  with  similar  articles  already  well-known  and  of  indis- 
pensable acceptance ;  as  for  example,  those  of  Ci'osse  &  Black- 
well,  Morton,  Coleman's,  Savory,  etc. 

"Such  an  effort  on  our  part  will  demand  an  immense  amount 
of  work,  with  a  consequent  loss  of  time  and  expenses  far  from 
insignificant  and  of  an  uncertain  amount,  and  all  this  we  cannot 
undertake  unless  upon  the  basis  of  exclusive  representation, 
which  would  also  justify  our  insistency  before  our  clients. 

"The  first  orders  obtained,  enclosed  herewith,  even  though 
not  very  large,  will  serve  to  give  you  an  idea  of  the  results  pos- 
sible for  us  to  obtain,  once  that  we  know  that  our  mediation  in 
this  business  is  clear  and  exact,  and  so  that  we  may  be  able  to 
rest  easy  as  to  the  future. 

"For  these  and  other  reasons,  we  insist  upon  asking  for  the 
representation  of  your  firm  for  the  Argentine  Republic,  Uru- 
guay, and  Paraguay,  these  last  named  countries  bordering  on 
our  own,  and  where  we  are  strongly  represented,  (connected) 

"Until  we  receive  your  reply  in  this  respect,  and  feeling  cer- 
tain that  you  will  take  favorable  action  upon  our  request,  we 
have  need  in  order  not  to  lose  time,  to  arrange  the  following 
matters : — 

' '  1st.    The  placing  of  your  lines. 

2nd.  Take  up  in  your  name  with  our  Goveriiment,  the  regis- 
tration of  your  trade-mark. 

3rd.  Obtain  from  the  proper  offices  the  chemical  analysis  of 
your  products  (mustard,  and  candied  cherries)  which  is 
an  indispensable  condition  for  their  introduction  into  the 
country. 

"As  you  can  see  by  the  foregoing,  our  system  of  working  is: 
to  sell  for  the  account  of  the  firms  we  represent  to  all  the  im- 
porting firms  of  edibles  in  the  principal  cities  of  our  section, 
(Argentina,  Buenos  Aires,  Rosario,  Bahia  Blanca,  Cordoba, 
Mendoza,  Tucuman,  Uruguay,  Montevideo,  and  Paraguay, 
Asuncion ) ,  with  whom  we  are  closely  connected  for  many  years ; 


248    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  firms  we  represent  sendiiifi'  and  invoicing  their  merchandise 
direct  to  the  purchasers,  regarding  whom  the  bank  in  New  York 
will  furnish  all  information  regarding  their  standing  and  re- 
sponsibility. 

"As  a  rule,  or  generally,  sales  are  made  payable  by  draft 
drawn  at  60/90  days  sight,  terms  conceded  by  tlie  European 
firms  and  which  assists  greatly  operations. 

"For  our  mediation  the  factories  (firms?)  grant  us  a  com- 
mission that  varies  according  to  the  article  sold.  In  the  case 
of  your  firm  we  have  asked  for  5%,  which  is  the  minimum  paid 
for  this  line,  but  we  trust  that  if  it  is  possible  that  you  will  give 
us  a  little  more,  to  encourage  and  compensate  us  a  little  for 
our  efforts  necessary  for  one  or  two  years  before  the  articles 
of  your  firm  commence  to  be  known  in  this  market. 

"We  have  carefully  examined  your  line  of  samples  with  some 
of  our  principal  clients  and  for  the  moment  we  can  say  that  the 
following  articles  will  have  the  best  sale : 

1st.  Mustard  in  glass  jars,  with  the  exception  of  "mug,"  as 
the  weight  of  the  package  (container)  makes  it  unsaleable. 
2nd.  Mustard  in  tins  (in  powder). 

"As  regards  the  spices:  In  order  to  expedite  the  sale  of 
these  it  will  be  necessary  to  adopt  special  containers,  acceptable 
and   current   in   this   market. 

"For  example:  The  pepper  presented  in  cardboard  boxes  is 
unsaleable,  it  being  necessary  to  put  same  in  glass  bottles,  as 
that  of  Crosse  &  Black  well,  of  which  we  are  sending  you  (No.  1) 
one  by  the  same  parcel  as  the  Yerba  Mato,  and  naturally  in  order 
to  distinguish  same  it  would  be  necessary  to  make  it  a  better  look- 
ing bottle  and  of  less  weight,  as  the  customs  here  collect  duties 
on  the  gross  weight  of  the  merchandise,  which  serves  to  ele- 
vate very  much  their  cost. 

"The  spices  must  also  come  in  small  packages,  packed  10  or 
20  in  pasteboard  boxes,  like  those  of  Morton,  sample  of  which 
we  are  also  sending  you  (No.  2). 

"Your  bottles  No.  41  (referring  only  to  the  empty  bottle) 
curry  powder,  are  too  thick,  and  therefore  too  heavy ;  bottles  are 
needed  like  those  containing  Crosse  &  Blackwell  red  pepper,  of 
which  we  are  sending  you  a  sample  (No.  3). 

"If  you  are  willing  to  modify  your  different  containers  in 
accordance  with  the  necessities  of  the  market,  we  could  also 
develop  the  sale  of  the  spices,  although  we  wish  to  say  that  their 
sale  in  small  containers  is  not  very  large  either  as  some  firms, 
specialists  in  the  line,  receive  such  articles   (pepper,  cinnamon, 


DISTRIBUTION    POLICY  249 

candied  cinnamon,  nutnieji",  cloves,  etc.)  at  wholesale  in  sacks  or 
bales,  putting-  it  up  themselves  here. 

**One  way  to  obtain  a  large  sale  in  spices  would  be  to  sell  same 
at  wholesale.  imi)ortin,L''  them  in  sacks  and  bales,  but  for  this  it 
would  be  necessary  that  they  be  Avell-placed  since  because  of  a 
Japanese  line  of  steamers,  the  importers  of  our  section,  are 
able  to  obtain  these  diiferent  lines  direct  from  the  places  of 
production,  Sino:apore  and  Ceylon. 

"We  trust  to  hear  from  you  regarding  this  matter,  as  we 
would  be  very  interested  in  handling  spices  at  wholesale,  and 
hope  if  you  are  not  in  a  i)osition  to  compete  with  direct  compe- 
tition, that  you  will  recommend  us  to  such  purveyors  of  your 
firm  that  might  Avish  to  work  your  markets;  and  we  thank  you 
in  advance  for  whatever  you  may  be  able  to  do  in  this  direction. 

"ADVERTISING:  We  should  like  to  have  your  information 
regarding  advertising  propaganda,  because  if  you  are  disposed  to 
do  some,  although  on  a  small  scale  for  the  moment,  it  would 
contribute  very  much  in  placing  your  articles  before  the  public. 

"In  our  opinion,  our  work  and  yours  does  not  consist  simply 
in  selling  to  the  wholesaler,  but  also  in  helping  him  to  dispose 
of  our  lines,  bringing  it  about  so  that  the  consumer  will  ask 
for  same  of  the  retailer,  and  the  retailer  in  turn  demand  same 
from  wholesaler,  and  the  only  way  so  far  as  we  know  to  obtain 
this  end  is  b}^  propaganda,  and  if  you  have  advertising  placards 
we  would  thank  you  to  send  same  in  a  case,  to  be  distributed 
among  the  clients  placing  an  order. 

"ORDERS:  Herewith  we  are  pleased  to  hand  3'ou  the  fol- 
lowing orders  as  trial  orders,  accompanied  by  the  corresponding 
information  slips  from  the  bank  in  New  York,  and  we  would 
thank  you  to  kindly  fill  these  orders  as  soon  as  possible  and  at 
best  prices  possible.  If  our  friends  are  satisfied  with  the  execu- 
tion of  this,  their  first  order,  they  will  order  again  in  larger 
quantities. 

"No.  500  from  Messrs.  Smith  &  Lee,  Buenos  Aires. 
"No.  501  from  Messrs.  Carlos  Mitre  &  Co.,  Bahia  Blanca. 

"PREPARED  MUSTARD:  Two  clients  who  had  given  us 
quite  important  orders  have  cancelled  same  at  the  last  moment 
as  they  find  the  mustard  veiy  liquid.  Could  you  not  send  us  an 
article  that  would  be  thicker? 

"In  j'our  catalog  for  the  month  of  April  there  is  no  mention 
of  the  price  of  Jar  No.  74,  and  we  would  thank  you  to  give  us 
same  as  soon  as  possible,  and  at  the  same  time  your  discount  and 
gratuities  allowed  to  wholesalers. 

*  *  Awaiting  your  reply,  we  remain ' ' 


250    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  branch  bank  sent  favorable  credit  reports  upon 
Jose  Garate  and  upon  the  two  firms  whose  orders  were 
placed.  In  a  letter  sent  to  the  home  office  the  Argentina 
representative  spoke  as  follows : — 

"Argentina  is  a  peculiar  market.  We  might  say  that  the 
business  part  of  the  nation  is  Buenos  Aires,  and  all  other  cen- 
ters in  the  Republic  are  intimately  connected  with  the  capital. 
That  is  the  reason  why  subdivision  of  sales  territory  is  not  as 
successful  in  this  market.  Especially  is  this  so  in  the  spice 
business,  whei'e  the  countrj^'s  trade  is  in  the  habit  of  coming  to 
Buenos  Aires  for  its  spices. 

"Although  Jose  Garate  is  not  what  you  consider  a  large  firm, 
(their  capitalization  is  rather  small),  they  deal  with  very  good 
and  reliable  liouses  in  this  market,  such  as  those  included  in  the 
order. 

"A  question  will  naturally  come  to  your  mind  and  this  is, 
why  we  have  not  selected  for  a  representative  one  of  the  larger 
firms.  In  the  first  place,  Jose  Garate  &  Company  have  been 
strongly  recommended  to  us,  and  secondly,  because  we  under- 
stand that  large  firms  are,  as  a  rule,  inclined  to  refuse  exclusive 
agencies  because  in  that  way  they  are  free  to  purchase  in  the 
open  market  at  the  most  convenient  prices." 

In  the  conference  with  the  officers  of  Mathews  &  Wolfe 
Company,  representatives  of  the  New  York  bank  ad- 
vised the  company  to  meet  the  request  of  Jose  Garate 
for  advertising  of  the  company's  products  in  Argentina. 
At  the  time  all  the  store  placards  and  advertising  ma- 
terial of  the  company  were  printed  in  English  and  were 
not,  of  course,  suitable  for  the  Spanish  speaking  coun- 
try. The  management  thought  that  inasmuch  as  they 
were  selling  the  spices  to  the  South  American  trade  on 
a  close  margin,  they  w^ere  not  justified  in  making  expen- 
ditures on  advertising  until  the  South  American  rep- 
resentatives had  demonstrated  ability  to  sell  the  goods. 
Accordingly,  they  wrote  to  Jose  Garate  &  Company  to 
this  effect. 

In  the  United  States,  Mathews  &  Wolfe  had  the  fixed 
policy  of  granting  no  exclusive  agencies  to  wholesalers. 
The  management  felt  inclined  to  pursue  this  same  policy 
in  its  foreign  business.     It  was    thought   that    through 


DISTRIBUTION   POLICY  251 

open  competition  in  foreign  markets  a  wider  distribu- 
tion would  be  gained. 

Should  the  management  have  granted  an  exclusive 
agency  to  Jose  Garate  for  the  territory  asked  by  him! 
If  so,  what  provisions  should  have  been  included  in  an 
agency  contract  in  order  to  atford  mutual  protection'? 

Should  the  management  have  pursued  a  ditferent  pol- 
icy with  regard  to  the  request  of  Jose  Garate  &  Com- 
pany for  advertising  helps? 

Problem  60 

KiLTON  Typewriter  Company — Essentials  of  Contract 
WITH  Foreign  Agency 

To  insure  uniformity  in  its  legal  relations  with  its 
foreign  representatives  the  Kilton  Typewriter  Company 
has  had  drawn  up  an  outline  of  the  essential  points  to 
be  embodied  in  all  contracts  between  the  company  and 
its  foreign  agents.*  This  company  exports  typewriters 
to  most  of  the  important  countries  of  Europe  and  Latin 

*Agency  contracts  are  treated  in  Eder,  Foreign  and  Home  Law,  (Business 
Training  Corp.),  Chap.  VI;  Hough,  Praetical  Exporting,  page  291;  Wyman, 
Direct  Exporting,  (Business  Training  Corp.),  Chap.  V;  and  Wolfe,  Theory 
and  Practice  of  International  Commerce,  Chaps.  X-XIII;  and  in  the  follow- 
ing articles  in  periodicals : 

The  World's  Marlccis. 

Sept.  1919,  p.  22— "The  I-]xport  Agency  Contract." 
Mar.  1921,  p.  32— "The  Foreign  Agency  Contract." 

Export  Trade  and  the  Exporter's  Eeview. 

Nov.    6,    1920,    p.    11 — "Tlic    Whys    and    Wherefores    of    Argentine 

Agency  Contracts. ' ' 
July  9,  1921,  p.  5— "Diatribntors'  Contracts." 
July  16,  1921,  p.  8 — "Exclusive  Agency  Contracts." 
July  23,  1921,  p.  5—"  Terms  of  Sales  Contracts." 
Nov.   19,   1921,   p.   5 — "Special   Clauses   in   Export   Contracts." 
Jan.  28,  1922,  p.  14 — "The  Legal  Aspects  of  Foreign  Agency  Agree- 
ments. ' ' 
May  20,  1922,  p.  1(5 — "Bonding  Service  as  a  Selling  Argument." 

Commerce    Eeports. 

Feb.  6,   1922,  p.   333— "  Agency  Contracts   in  Foreign    Trade." 

*In  an  article  in  World's  INfarkets,  Walter  F.  Wyman  has  enumerated  the 
items  in  a  typical  well-drawn  agency  contract  as  follows: 
(  1)   Agent's  official  name  and  address. 
(   2)    Seller's   official   name   and  address. 

(3)  Nature  of  relation  and  mutual  obligations. 

(4)  Territory  and  products. 


252    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

America,  relying  entirely  upon  exclusive  agencies  for 
the  foreign  distribution  of  its  product.  For  a  number 
of  years  the  company's  contract  with  each  agent  has 
been  based  on  local  conditions  and  has  embodied  those 
terms  which  the  agent  and  the  company's  representa- 
tive considered  to  be  most  important.     In  a  good  many 

(   5)   Keserved  rights  of  seller  in  described  territory. 

(   G)    Terms   of   contract. 

(   7)   Method  and  time  of  compensation  of  agent. 

(   8)   Protection  of  agent  and  compensntion  on  direct  or  indirect  sales 

in  his  territory. 
(   9)   Prices,  discounts,  etc. 

(10)  Terms  of  sale. 

(11)  Conditions  surrounding  sales  by  agent  for  account  of  seller. 

(12)  Provisions  covering  bankruptcy,  etc. 

(13)  Prices  at  which  agent  shall  sell. 

(14)  Granting  or  withholding  right  of  agent  to  sell  outside  his  own 
territory. 

(I.'))   Eight  of  agent  to  sell  or  act  as  agent  for  competing  products. 

(16)  Allowances  for  advertising,  samples,  and  selling  expenses. 

(17)  Eequired  purchases  or  sales  in  each  year  of  agency  relation. 

(18)  Definition  of  such  purchases  or  sales  and  required  relation  (if 
any)  between  purchases  by  agent  in  comparison  with  sales  to 
others. 

(19)  Provisions  relating  to  the  possible  failure  of  agent  to  reach  pur- 
chase or  sales  total. 

(20)  Statement  of  the  right  of  seller  to  pass  on  and  to  limit  credits  on 
purchases  and  sales. 

(21)  Cancellation  clauses. 

(22)  Rights  and  privileges  of  seller  and  agent  at  expiration  of  con- 
tract or  at  termination  of  contract  equitably  protected. 

(2.3)  Repairs,  damages,  and  claims  defined  and  policy  and  practice 
portrayed. 

(24)  Provision  for  disposition  of  stock  at  ending  of  contract. 

(25)  Nonassignability  of  contract. 

Mr.  Wyman  suggests  that  the  following  points  should  be  included  in  some 
contracts : 

1.  Establishment  of  service  dc])ots. 

2.  Employment  by  agent  of  technical  staff. 

3.  Maintenance  of  display  rooms,  warehouses  or  sales  offices. 

4.  Carrying  of  parts  or  attachments. 

5.  Allowances  for  competitive  products  "traded  in"  or  tnken  in  part 

payment  by  agent. 
6    Value  of  stock  to  be  carried  by  agent. 

7.  Sales  assistance  to  be  rendered  by  seller's  representatives  or  other- 

wise. 

8.  Penalty  clauses  other  than  those  relating  to  forfeiture  of  contrnct. 

9.  Arbitration   of  dis])utes   by  named    third  party  or   parties. 

10.  Authority   of  agent  to  act   for  seller. 

11.  Owiiership   of  trade-marks,   copyriglits   and   patents. 

12.  Changes  in  customs  and  tariffs. 

13.  Changes  in  ocean  or  inland  freight  rates. 

14.  Changes  in  marine  and  war  risk  insurance  rates. 

15.  Reports  by  agent  of  his  sales  in  detail  and  of  visits  to  prospective 

buyers  and  information  obtained  thereby. 


DISTRIBUTION    POLICY  253 

instances  the  contract  has  been  more  or  less  of  a  com- 
promise between  the  company  and  its  agent.  Because 
of  the  resulting  lack  of  uniformity  and  the  manner  in 
which  unscrupulous  agents  have  endeavored  to  take  ad- 
vantage of  local  laws  and  the  interpretation  of  their 
contracts,  the  com.pany  is  contemplating  embodying 
the  following  points  in  all  contracts  with  its  foreign 
agents : 

1.  Quota:  A  specified  number  of  typewriters  must 
be  sold  each  year  by  the  company's  agent,  this  number 
being  based  on  the  general  requirements  of  the  market 
in  which  the  agent  has  exclusive  rights. 

2.  Price :  The  established  resale  price  must  be  ad- 
hered to  by  each  agent. 

3.  Territory :  The  territory  of  each  agent  must  be 
clearly  defined  in  order  to  avoid  any  possible  confusion. 

4.  Branch  or  sub-agencies :  The  number  of  branch 
or  sub-agencies  allowed  to  be  established  by  each  agent 
must  be  determined  at  the  time  the  contract  is  signed. 
As  far  as  possible,  population  will  be  used  as  a  basis 
for  determining  the  number  of  sub-agencies. 

5.  Percentage  of  agent's  discount:  The  percentage 
of  discount  allowed  each  agent  shall  vary  with  the 
length  of  time  which  the  company  has  been  selling  ma- 
chines in  his  market  and  the  type  of  competition  that 
he  must  face. 

16.  Cost  of  cables,  correspondence  and  oftice  expenses. 

17.  Compensation  of  agent  for  mere  acceptance   of  agency  contract. 

18.  Local  or  temporary  purcliases  from  other  sources  of  supply  by  agent 

in  event  of  seller  being  unable  to  supply  his  products. 

19.  Defrayment  of  agent's  expenses  on  trips  to  seller  and  frecjuency  of 

such  trips. 

20.  Insurance  on  stock  carried  by  agent. 

21.  Financial  arrangements  to  protect  seller  in  cases  where  consignment 

stock  is  carried. 

22.  Guaranteeing  of  payment  bj'  third  party  in  event  of  agent's  fail- 

ure to  pay  in  accordance  with   contract   or  deposit   of  funds  in 
escrow. 

23.  Right    of   agent   to   ai)point   sub-agent    and    conditions    under    wliich 

sucli  sub-agent  sliall  operate. 

24.  Division  of  excess  profits  when  sales  are  made  either  by  agent  or 

seller  at  prices  higher  than   mentioned   in   nuiin  clauses  of  con- 
tract. 

25.  Payment   of   taxes,   cost  of   complying   with  legislative   enactments 

either  in  country  of  seller  or  of  agent. 


254    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

6.  Fluctuation  of  price:  A  clause  stating  that  all 
prices  are  subject  to  change  without  prior  notice.  At  its 
discretion,  the  company  is  to  allow  adjustment. 

7.  Terms  of  payment:  The  exact  terms  to  be  al- 
lowed each  agent  must  be  carefully  stated  in  order  to 
avoid  any  jjossible  financial  arguments.  Each  agent 
should  understand  clearly  whether  he  is  to  pay  cash 
or  to  be  allowed  credit  of  30,  60,  or  90  days. 

8.  Guarantee :  The  company  guarantees  each  type- 
writer against  any  defects  and  agrees  to  replace  with- 
out charge  any  defective  parts. 

9.  Insurance:  All  typewriters  must  be  insured 
against  breakage  by  the  company  in  order  to  enable 
the  dealer  to  secure  damages  for  any  machines  not  de- 
livered in  good  condition. 

10.  Services:  Each  dealer  must  agree  to  render 
service  to  customers  in  return  for  a  reasonable  compen- 
sation by  the  company. 

11.  Competing  makes  of  typewriters:  Each  dealer 
must  agree  not  to  sell  or  advertise  any  typewriters  of 
other  makes  than  the  Kilton  machine.  This  clause  ap- 
plies to  second-hand  as  well  as  new  machines. 

12.  Trade-marks :  Each  dealer  agrees  to  waive  all 
trade-marks,  marks  of  word  or  symbol  applied  upon  Kil- 
ton typewriters  and  will  not  directly  or  indirectly  secure 
registration  for  the  same  in  any  country  at  any  time. 

13.  Dealer's  name:  In  order  to  assist  the  dealer  in 
building  up  good-will  for  himself  as  well  as  the  machine 
that  he  handles  the  company  agrees  to  place  the  dealer's 
name  on  the  front  plate  of  each  machine. 

14.  Assigning  rights  of  contract:  No  dealer  can  as- 
sign his  rights  in  this  contract  to  another  witliout  the 
consent  of  the  company. 

15.  Cancellation  clause:  The  company  shall  have  the 
right  to  withdraw  the  exclusive  agency  from  any  dealer 
who  does  not  take  the  quota  laid  down  in  his  contract. 

16.  Interpretation  of  contract :  All  questions  aris- 
ing in  regard  to  this  contract  shall  be  interpreted  under 
the  laws  of  the  state  of  New  York. 


DISTRIBUTION    POLICY  255 

The  proposal  to  embody  these  terms  in  all  contracts 
^^•ith  agents  was  submitted  to  the  company's  travelers  in 
the  foreign  field  for  criticism  and  their  reports  raised 
the  following  objections: 

In  some  instances  it  is  impossible  to  base  the  number 
of  agencies  or  sub-agencies  on  the  population  since  in 
many  territories,  particularly  in  South  America,  out  of 
a  population  of  100,000,  99,000  may  be  negroes  or  half- 
breeds,  the  majority  of  whom  are  illiterate  and  practi- 
cally penniless.  ^lany  agents  are  apt  to  object  to  the 
clause  that  all  prices  are  subject  to  fluctuation  ^^ithout 
prior  notice,  since  it  leaves  them  in  a  poor  bargaining 
position  with  the  company.  Again,  the  contract  pro- 
vides that  a  dealer  must  agree  not  to  sell  or  advertise 
any  other  makes  of  machines,  either  new  or  second- 
hand. Frequently,  however,  in  order  to  make  a  sale  it 
is  necessary  to  take  a  second-hand  machine  of  another 
make  in  trade.  The  only  way  in  which  this  other  make 
of  machine  can  b3  disposed  of  at  a  profit  is  for  the  deal- 
er to  repair  it  to  the  best  of  his  ability  and  resell  it  to 
another  customer.  A  restriction  on  the  handling  and 
advertising  of  machines  made  by  other  manufacturers 
is  incompatible  with  the  interests  of  the  Kilton  Com- 
pany. A  responsible  dealer  who  is  a  good  business  man 
knows  perfectly  well  that,  although  he  may  be  able  to 
sell  a  large  number  of  typewriters  one  year,  he  cannot 
always  do  so  the  next.  Such  a  man  will  hesitate  to  sign  a 
contract  which  would  enable  the  company  to  terminate  his 
dealership  at  will  if  he  failed  to  take  the  arbitrary  quota 
set  forth  in  this  contract. 

The  final  objection  is  with  regard  to  the  clause  requir- 
ing that  all  questions  arising  out  of  this  contract  be  in- 
terpreted according  to  the  laws  of  the  state  of  New 
York.  A  dealer  in  Brazil,  Argentina,  or  Austria  is  not 
familiar  with  the  laws  of  New  York  state  and  he  ^^i\\ 
naturally  interpret  the  contract  according  to  the  laws 
of  his  own  country  with  which  he  is  familiar. 

The  executive  committee,  which  drew  up  these  terms 
to  be  embodied  in  the  company's  contract  with  its  for- 


266    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

eigii  agents,  takes  the  g-romid  that  the  company  has  a 
right  to  demand  these  terms,  ])nt  that  in  the  interpreta- 
tion of  the  contract  it  shonki  take  into  consideration 
local  business  conditions  and  the  value  of  the  agency  to 
the  company.  If  an  efficient  dealer  takes  a  number  of 
second-hand  typewriters  in  trade,  the  company  could 
give  him  permission  to  dispose  of  these  other  machines 
but  at  the  same  time  he  should  be  required  to  refrain 
from  featuring  or  advertising  these  other  makes  to  the 
detriment  of  the  sale  of  Kilton  machines. 

With  regard  to  the  cancellation  of  the  agency,  if  the 
dealer  fails  to  take  the  required  quota  the  committee 
states  that  it  intends  this  clause  to  be  interpreted  very 
elastically,  depending  upon  local  business  conditions.  It 
is  thought  that  even  if  this,  clause  were  not  enforced  in 
every  case  it  would  give  the  company  a  good  sales 
"club"  to  hold  over  the  dealer's  head  and  prevent  him 
from  losing  interest  in  Kilton  typewriters.  If  the  deal- 
er is  efficient  and  a  valuable  representative  for  the  com- 
pany, it  can  still  permit  him  to  retain  his  exclusive 
agency  in  spite  of  the  fact  that  he  failed  to  take  his  quo- 
ta, but  the  decision  to  allow  such  a  dealer  to  retain  the 
exclusive  agency  rests  with  the  company.  By  this 
means  contracts  with  unsatisfactory  agents  can  be  ter- 
minated easily. 

Although  the  committee  which  drew  up  these  terms  is 
firmly  convinced  of  their  value,  the  consensus  of  opin- 
ion of  the  company's  foreign  travelers  is  that,  if  the  for- 
eign merchant  lacks  confidence  in  the  good  faith  of  the 
company,  because  of  the  terms  of  the  proposed  contract, 
not  only  will  a  number  of  agents  be  deterred  from 
signing  such  a  contract,  but  dealers  who  have  ^signed 
such  a  contract  will  not  be  enthusiastic  sales  agents  for 
Kilton  machines  when  they  feel  that  they  are  acting 
only  under  compulsion  and  that  the  company  has  taken 
an  unfair  advantage.  The  officials  of  the  company  are 
considering  whether  it  would  be  advisable  to  adopt  the 
terms  as  they  stand  or  to  substitute  modifications  along 
the  lines  of  the  suggestions  made  by  the  Kilton  Com- 
pany's foreign  travelers. 


DiSTRlRLTrON    FOI.K'V  25t 

Problem  61 
Houghton  Cotton  Mill — Exclusive  Agency 

The  Houghton  Cotton  Mill  is  attempting  to  regain  its 
trade  with  China. 

About  1905  the  Houghton  Company  sold  a  large  quan- 
tity of  grey  sheetings  in  North  China  and  Manchuria 
through  an  export  house  in  New  York  which  sold  to  any 
dealers  in  China  who  were  willing  to  carry  the  line. 
The  best  seller  was  a  36  inch  48x48,  3  yard  sheeting. 
This  product  was  sold  under  the  company's  chop  or 
brand  which  became  well  established  and  widely  known. 
During  the  following  years,  however,  American  sheet- 
ings were  almost  driven  from  the  market  by  Japanese 
competition. 

It  appeared  to  the  Houghton  Cotton  Mill  that  it  would 
be  difficult  if  not  impossible  to  regain  its  trade  in  grey 
sheetings  in  North  China  and  Manchuria.  It  seemed 
probable,  however,  that  it  might  build  up  a  trade  in 
grey  shirtings.  These  goods,  which  were  sold  in  all 
parts  of  C^hina  were  supplied  largely  by  England.  Jap- 
anese firms  had  not  begun  to  compete  in  this  line  to  any 
appreciable  extent. 

The  Manchester  Exporting  Company  is  an  English 
exporting  house  with  a  branch  in  New  York.  This 
company  follows  the  usual  English  policy  in  selling  cot- 
ton goods  abroad; — first,  its  goods  are  distributed  in 
China  through  an  exclusive  agency  granted  to  a  dealer 
in  that  market ;  secondly,  the  goods  are  sold  under  the 
chop  of  the  exclusive  agent. 

As  a  result  of  many  years  of  experience,  the  Man- 
chester Exporting  Company  has  evolved  the  following- 
standard  form  of  contract  which  it  makes  Avitli  exclusive 
agents  in  China  : — 

"Agreement  made  and  entered  into  this day  of 

19 — ,  by  and  between  (name  of  firm)  a  New  York  Corporation, 
of  the  first  part,  and  hereinafter  ealled  the  Employer,  and  the 
firm  of  (name  of  agent)  of  the  second  part,  and  hereinafter  called 
the  Agent :     Witnesseth  :     The  Employer  hires  and  engages  th€ 


258    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

agent  to  sell  finished  goods  only  which  are  dealt  in  hy  it  in  state 
of  (locality)  and  not  elsewhere. 

"The  Agent  accepts  the  employment  and  agrees  to  devote 
exclusive  time  and  ability  to  the  Employer's  interests  during  the 
term  of  this  agreement,  and  further  agrees  that  during  the 
employment  he  (they)  will  not  sell,  deal,  or  be  interested  as 
principal  or  otherwise  in  any  goods  of  the  lines  dealt  in  by  the 

Employer.     This  agreement  shall  commence  on  the day  of 

19 —  and  may  be  terminated  at  any  time  by  either 

party. 

"The  Employer  agrees  to  pay  and  the  Agent  agrees  1o  accept 
as  the  sole  compensation  of  the  employment,  a  commission  of 

per  cent  of  the  amount  (selling  price  less  Employer's  fixed 

discount)  on  all  goods  personally  sold  bj'  the  agent  in  the  terri- 
tory heretofore  mentioned,  provided,  however,  that  no  commis- 
sion shall  be  deemed  earned  until  the  goods  shall  have  been  paid 
for  by  the  customer  to  whom  the  Agent  shall  have  made  the  sale. 

"It  is  also  agreed  that  all  expenses,  traveling,  ofiice,  or  other- 
wise, incurred  by  the  Agent  shall  be  borne  and  paid  for  by  the 
Agent,  except  necessary  cable  expnses,  which  shall  be  paid  by  the 
Employer. 

"It  is  further  understood  and  agreed  that  the  Employer 
reserves  the  right  to  decline  to  accept  and  reject  any  orders  or  to 
ship  goods  to  fill  the  Agent's  orders,  and  to  accept  goods  objected 
to  or  refused  by  the  Agent's  customers,  without  liability  for  com- 
mission thereon, 

"It  is,  however,  provided  that  the  Agent  shall  liave  no  author- 
ity to  make  contracts  in  the  name  of  the  Employer  or  for  the 
Employer  and  all  orders  shall  be  tentatively  taken  by  the  Agent 
for  submission  to  the  Employer  for  its  actions  (acceptance  or 
rejection)  at  its  Ncav  York  office,  of  which  the  employer  shall 
be  the  sole  and  exclusive  judge  as  to  prices,  terms,  terms  of 
credit,  and  other  conditions  which  the  Employer  may  impose. 

"On  or  about  the  15th  day  of  each  and  every  month  during 
the  term  of  this  agreement  the  Employer  will  render  a  state- 
ment to  the  Agent  showing  the  net  amount  (selling  price  less 
Employer's  fixed  discount)  of  all  goods  shipped  pursuant  to  the 
Agent's  orders,  the  net  amount  of  goods  returned  by  the  Agent's 
Customers,  and  the  amount  of  commission  earned  upon  goods 
paid  for.  At  the  time  of  the  delivery  of  the  statement  referred 
to  herein,  the  Employer  agrees  to  pay  the  Agent  the  commission 
due  on  all  goods  paid  for  as  aforesaid,  deducting  any  advances 
made  or  commissions  paid  where  goods  have  been  refused  or 
returned  by  the  customers  subsequent  to  payment  of  commissions 
by  the  Employer. 


DISTRIBUTION   POLICY  259 

''It  is  further  understood  and  agreed  that  the  Agent  shall  not 
receive  or  be  entitled  to  commissions  on  any  goods  sold  direct  by 
the  employer  to  export  commission  houses  in  the  United  States 
or/and  to  persons,  firms,  corporations,  or  associations  located  in 
the  territory  hereinbefore  mentioned. 

"It  is  further  understood  and  agreed  that  the  foregoing  con- 
stitutes the  sole  agreement  between  the  parties  hereto,  and  no 
modification  hereof  shall  be  valid  unless  executed  by  the 
Employer  under  its  corporate  seal. 

"In  Witness  Whereof  the  parties  hereto  have  hereunto  set 
their  hands  and  seal  the  day  and  year  first  above  written. 

Signed 

Rider  Number  Two  to  Contract  dated 

Between  (firm)  and  (agent) 

"It  is  further  agreed  that  the  Agent  shall  receive  commissions 
on  all  goods  sold  direct  by  the  Employer  to  persons,  firms,  cor- 
porations or  associations  located  in  the  territory  heretofore 
mentioned,  provided,  however,  that  the  Employer  shall  not  be 
obliged  to  pay  commissions  to  any  other  persons,  firms,  corpora- 
tions or  associations  for  introducing  the  said  customers." 

Upon  inquiry  at  its  banks  the  Houghton  Company 
found  that  the  Manchester  Exporting  Company  had  an 
excellent  reputation  and  was  considered  financially 
very  sound.  Trade  inquiries  also  resulted  in  eminently 
satisfactory  reports.  As  a  consequence,  the  problem 
has  been  narrowed  down  to  the  question  of  whether  the 
company  should  sign  such  a  contract,  knowing  that  the 
house  with  which  it  is  doing  business  is  one  with  the 
highest  rej^utation. 


260    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Froblkm  62 

Gardner  Office  Equipment  Company — Completion  of 
Contract  with  Foreign  Agent 

The  Gardner  Office  Equipment  Company  has  had  not 
a  httle  difficulty  over  contracts  with  its  foreign  agents. 
This  firm  distributes  its  office  equipment  in  South  Amer- 
ica through  exclusive  agents  who  are  under  a  contract 
to  carry  a  specified  amount  of  stock  on  hand,  to  furnish 
a  repair  service,  to  carry  no  competing  brands  of  office 
equipment,  to  spend  a  specified  percentage  of  their  to- 
tal sales  in  advertising  Gardner  products,  and  to  build 
up  a  specified  volume  of  sales  in  their  territory.  In  sev- 
eral instances  agents  have  broken  their  contracts  by 
carrying  competing  lines  or  by  accepting  the  exclusive 
agency  for  Gardner  office  equipment  with  the  purpose 
of  *' smothering  the  line"  by  failing  to  push  its  sale. 
When  the  company's  representative  has  expostulated 
with  the  agent  he  generally  has  received  an  evasive  an- 
swer and  has  been  forced  to  resort  to  the  local  courts 
for  assistance  in  enforcing  the  contract  or  securing  dam- 
ages. The  decisions  of  these  foreign  courts  have  usually 
been  adverse  to  the  Gardner  Company. 

In  the  past,  when  the  Gardner  Company's  represen- 
tative has  selected  an  agent  to  distribute  its  product,  a 
contract  has  been  drawn  up  and  signed  on  the  spot  by 
the  agent  and  the  representative  of  the  company.  It  has 
been  suggested  that,  in  order  to  take  the  matter  out  of 
the  hands  of  the  local  foreign  courts,  contracts  should 
bear  the  clause  that  any  disputed  point  between  the 
two  parties  would  be  interpreted  under  the  laws  of  the 
state  of  New  York,  To  make  sure  that  this  clause  is 
adhered  to  and  that  the  New^  York  courts  have  jurisdic- 
tion in  such  a  case  the  contract  should  be  signed  by  the 
foreign  agent  first  and  then  returned  to  the  Gardne)' 
Company's  New  York  office  for  the  signature  of  the 
company's  officers.  In  this  manner  the  company  would 
insure  the  completion  of  the  contract  in  the  United 
States. 


DISTRIBUTION   POLICY  261 

This  method  of  entering  into  a  contract  between  the 
Gardner  Company  and  its  foreign  agents  would  be  sat- 
isfactory if  the  company  were  interested  only  in  court 
decisions,  but  it  has  been  pointed  out  that  an  exclusive 
agent  Avho  is  interested  in  doing  only  what  the  court 
compels  him  to  do  is  not  apt  to  use  aggressive  methods 
in  distributing  the  company's  product  and  is  usually  an 
unsatisfactory  representative.  If  the  company  would 
use  greater  care  in  inquiring  into  the  character  and  abil- 
ity of  its  foreign  agents  before  giving  them  the  power  to 
represent  it,  this  difficulty  might  be  remedied  without 
unnecessary  litigation.  The  Gardner  Company  would 
like  to  be  advised  as  to  which  means  to  use  in  avoiding 
legal  difficulties  with  its  foreign  agents. 


Problem  63 

Caledonia  Typewriter  Company — The 
Appointment  of  Sub-Agents 

The  Caledonia  Typewriter  Company  is  attempting  lu 
increase  the  sales  of  its  product  both  in  Europe  and  in 
Latin  America.  Its  present  policy  is  to  appoint  as  ex- 
clusive agent  in  each  country  one  of  the  most  progress- 
ive merchants  in  the  business.  This  man  is  conversant 
with  local  conditions  and  far  better  informed  on  market 
possibilities  than  the  average  American  salesman. 
Since  it  is  impossible  for  one  dealer  to  cover  all  the  ter- 
ritory of  a  large  country  himself,  he  is  allowed  to  ap- 
point sub-agents  in  the  principal  districts.  Although 
many  of  these  sub-agents  are  first-class  merchants  with 
a  reputation  for  industry  and  ability,  they  are  not  as 
a  rule  familiar  with  American  sales  methods,  and  the 
sale  of  Caledonia  typewriters  in  the  foreign  field  is  not 
so  large  as  the  company  desires.  Even  the  exclusive 
agents  themselves  are  sometimes  not  sufficiently  familiar 
with  the  most  efficient  and  enterprising  sales  methods 
to  enable  them  to  increase  their  sales  rapidly  or  to  give 
their  sub-agents  proper  instruction. 


262    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  company  maintains  a  traveler  in  each  large  country 
or  group  of  countries  whose  duty  is  to  be  educate  these 
agents  and  sub-agents  in  modern  methods  and  to  at- 
tempt to  stimulate  trade.  These  men  have  been  serious- 
ly handicapped  in  their  work,  particularly  with  the  sub- 
agents,  because  of  the'  fear  of  the  exclusive  agent  for  the 
entire  country  that  the  company  is  trying  to  work  into 
the  graces  of  the  sub-agent  and  eventually  deal  with 
him  direct.  Whenever  the  company  has  tried  to  stimu- 
late sub-agents  to  greater  sales  efforts  through  corre- 
spondence from  the  home  office  the  same  difficulty  has 
arisen  and  the  exclusive  agent,  who  thinks  the  company 
has  ulterior  motives  in  corresponding  with  his  sub- 
agents,  frequently  becomes  suspicious  and  loses  all  in- 
terest in  cooperating  with  the  company  or  pushing  the 
sale  of  Caledonia  machines. 

The  Caledonia  Company  realizes  that  where  indus- 
tries and  resources  are  not  developed  to  the  extent  that 
they  are  in  the  United  States  it  must  use  greater  leni- 
ency in  passing  judgment  on  sales  results.  The  officials 
are  aware  that  altogether  too  frequently  there  is  a  ten- 
dency to  judge  Russia,  Austria,  Brazil,  and  other  Euro- 
pean and  South  American  countries  by  the  United 
States  standard.  They  also  realize  that  many  com- 
panies attach  more  value  to  innnediate  results  than  to 
a  sound  organization.  They  are  not  attempting  there- 
fore to  secure  a  sales  boom  in  foreign  lields  such  as 
might  be  possible  in  a  domestic  sales  district,  nor  are 
they  attempting  to  secure  excessively  large  orders  im- 
mediately. The  company  is  desirous,  however,  of  im- 
proving its  business  in  the  foreign  field  from  year  to 
year  and  it  is  not  content  to  rely  on  old-fashioned  for- 
eign tactics  to  secure  this  ideal.  Too  often  the  com- 
pany has  found  that  its  foreign  agent  calls  upon  a  poten- 
tial customer  only  to  be  told  that  the  customer  does  not 
care  to  purchase  a  Caledonia  machine.  Then  instead 
of  making  an  effort  to  convince  the  prospect  of  the  de- 
sirability of  buying  this  equipment  and  eventually  secure 
a  sale,  the  agent  considers  the  matter  closed,  crosses^ 


DISTRIBUTION    POLICY  263 

the  name  of  the  prospect  off  his  list.  If  he  does  de- 
cide to  call  again  a  couple  of  years  later  his  visit  is  not 
to  convince  this  merchant  by  sales  argument  that  he 
needs  a  Caledonia  machine,  but  merely  to  learn  whether 
or  not  the  prospect  has  changed  his  mind. 

One  plan  being  considered  as  a  possible  method  of 
stimulating  sales  is  to  have  the  exclusive  agent  receive 
letters  from  the  president  of  the  Caledonia  Typewriter 
Company  explaining  to  him  how  much  the  company  ap- 
preciates his  work  and  how  it  desires  to  continue  his 
services.  The  letter  would  then  explain  that  the  com- 
pany officials  realize  that  the  agent  is  frequently  over- 
worked in  attempting  to  cover  his  territory  and  that 
the  president  wishes,  by  stimulating  the  sales  of  the 
sub-agents  through  correspondence,  to  assist  him  to  se- 
cure greater  sales  and  hence  a  greater  profit  for  him- 
self. A  copy  of  each  letter  written  to  the  sub-agent  is 
to  be  sent  to  the  exclusive  agent,  so  that  the  latter  would 
have  a  complete  knowledge  of  what  the  company  is  do- 
ing. In  the  same  manner  the  company's  traveler  who 
calls  on  each  sub-agent  should  try  to  do  so  as  far  as  pos- 
sible in  the  presence  of  a  representative  of  the  exclusive 
agent,  or  at  least  inform  the  latter  whenever  he  has  made 
such  a  call,  and  what  transpired. 

One  of  the  chief  obstacles  to  the  successful  working 
out  of  this  plan  is  that  most  of  the  company's  foreign 
agents  have  api)arently  read  of  the  American  method 
of  selling  direct  and  have  learned  how  manufacturing 
companies  have  frequently  tried  to  eliminate  the  whole- 
saler or  middleman.  Tt  is  doubtful,  therefore,  if  letters 
from  the  company's  home  office  would  quiet  their  sus- 
picions on  this  point;  in  fact,  it  is  conceivable  that  these 
letters  might  be  the  cause  of  increasing  their  distrust. 

Since  the  agents  appear  to  suspect  the  company  no 
matter  what  its  motives,  another  plan  under  contem- 
plation is  to  change  the  company's  policy  completely, 
do  exactly  what  a  large  number  of  agents  apparently 
expect  anyway,  and  appoint  all  agents  and  sub-agents 


264    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

direct  from  the  home  office  in  New  York.  This  policy 
would  undoubtedly  destroy  the  good-will  of  the  com- 
pany's present  representatives,  but  it  would  at  least 
enable  it  to  train  its  foreign  sales  agents  in  modern  meth- 
ods and  would  enable  it  to  hold  the  threat  over  the  head 
of  each  agent  and  sub-agent  that  his  agency  would  be 
revoked  if  his  sales  did  not  reach  the  desired  quota. 

Should  the  company  continue  to  allow  agents  to  ap- 
point sub-agents!  If  so,  how  should  it  stimulate  sales 
among  sub-agents? 

Would  it  be  advisable  for  the  company  to  appoint  all 
agents  and  sub-agents  from  its  New  York  office!  If  so, 
how  could  it  preserve  the  good-will  of  its  present  organ- 
ization! Would  the  company  be  able  to  use  any  addition- 
al sabs  stimulation  under  this  plan  which  it  could  not 
use  at  the  present  time  ? 


CHAPTER  VI 


EXPORT  POLICIES— POLICIES  RELATING 
TO  PRICES  AND  TERMS  OF  SALE 

PRICE  policies  present  some  of  the  most  perplexing- 
problems  which  exporters  have  had  to  face  dur- 
ing the  past  few  years.  Every  exporter  knows 
that  export  business  is  undesirable  unless  he  can  in  the 
long  run  secure  prices  which  will  be  profitable.  If  he  is 
an  economist,  he  also  knows  that  price  is  the  result  of 
a  series  of  influences  over  many  of  which  he  has  no  con- 
trol. 

Price  as  used  in  the  economic  sense  contains  two  ele- 
ments— first,  it  represents  value  of  one  commodity  in 
relation  to  other  commodities ;  and  secondly,  that  value  is 
expressed  in  terms  of  money.  The  unusual  situations 
prevailing  in  the  past  eight  years  have  changed  the  val- 
ues of  many  commodities  both  in  terms  of  other  commod- 
ities and  in  terms  of  the  monetary  units  according  to 
which  values  were  expressed.  The  disturbance  of  pro- 
duction and  the  great  increase  in  demand  for  certain 
types  of  products  as  a  result  of  the  war  conditions  are 
partly  responsible  for  this  condition.  Much  more  per- 
plexing, however,  are  the  complications  brought  about 
by  the  monetary  situation  throughout  the  world.  Na- 
tion after  nation  has  gone  over  to  a  paper  money  basis. 
Depreciation  of  currency  has  taken  place,  a  depreciation 
which  is  without  a  parallel  in  monetary  history.  Coupled 
with  the  scarcity  of  gold  in  many  countries  and  prac- 
tical embargoes  on  its  shipment,  gold  has  been  re- 
moved from  practical  operation  as  the  international 
basis  of  exchanges.  International  trade  balances  have 
been  changed  by  war  conditions.    Creditor  nations  have 

365 


266    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

become  debtor  nations,  and  debtor  nations  have  become 
creditor  nations.  As  a  consequence,  exchange  rates 
have  fluctuated  violently,  the  fluctuations  covering  a 
range  which  before  the  war  would  have  been  regarded 
as  impossible.  To  carry  on  business,  to  quote  prices, 
and  to  get  payment  for  goods  under  such  conditions 
present  problems  of  extreme  difficulty  for  the  export 
house  and  the  exporting  manufacturer. 

The  exporter  in  quoting  prices  for  foreign  trade  has 
this  subconsciously  in  mind;  but  if  he  abstracts  the  dis- 
turbing influences  of  political  and  exchange  conditions 
in  international  trade,  he  will  And  that  the  problems  to 
be  decided  in  regard  to  prices  are  the  same  as  in  domes- 
tic trade.  The  manufacturer  must  fix  prices  upon  his 
goods  within  the  limits  imposed  by  economic  conditions. 
For  staples,  for  goods  in  which  there  is  competition,  he 
must  take  account  of  the  price  levels  prevailing  in  the 
market.  Perhaps  even  more  generally  than  in  the  do- 
mestic market  for  manufactured  products  will  prevailing- 
market  prices  determine  what  can  be  secured  by  the 
manufacturer  for  his  goods  in  foreign  transactions. 
Many  manufacturers  endeavor  by  giving  service,  by 
identifying  products,  and  by  selling  trade-marked  and 
patented  articles  to  create  a  demand  for  their  j^roducts 
at  even  higher  than  competitors'  prices.  Manufacturers 
may  adopt  with  some  degree  of  success  the  market  plus 
policy;  i.  e.,  selling  at  more  than  the  market  price,  in 
part  by  creating  through  advertising  or  otherwise  the 
impression  of  greater  desirability.  Such  a  policy  is  fol- 
lowed by  numerous  manufacturers  in  foreign  trade  as 
well  as  in  domestic  trade,  but  is  not  so  frequently  carried 
out  as  in  the  domestic  market  because  of  the  lack  of  ad- 
vertising facilities  and  the  very  much  greater  percent- 
age of  illiteracy  in  cei'tain  foreign  countries. 

In  international  trade  goods  are  not  infrequently  sold 
at  a  price  less  than  the  prevailing  domestic  market.  Two 
types  of  cases  may  be  distinguished — first,  those  in 
Avhicli  lower  than  domestic  market  prices,  even  at  prices 
involving  a  loss,  are  quoted  in  order  to  break  into  a  mar- 


PRICE  POLICY  267 

ket  in  competition  with  similar  goods  which  are  at  pres- 
ent in  possession  of  the  market.  This  practice  is  said  to 
have  been  carried  on  very  frequently  by  the  Germans 
and  is  one  which  it  is  expected  mig'ht  be  carried  out  by 
our  export  combinations  in  order  to  penetrate  foreign 
markets.  A  second  set  of  cases  includes  those  concerns 
which  consistently  exjiort  a  part  of  their  production  at 
lower  than  domestic  prices  either  in  order  to  keep  up 
prices  in  the  domestic  market  or  to  dispose  of  occasional 
surpluses  in  the  foreign  market.  The  third  set  of  con- 
ditions includes  those  in  which  the  American  exporter 
quotes  lower  than  competitors'  prices  because  of  the 
greater  efficiency  of  his  organization  in  manufacture  and 
distribution.  It  is  this  last  type  of  organization  which 
can  secure  and  maintain  a  hold  upon  foreign  markets 
from  which  it  cannot  be  dislodged  by  foreign  competi- 
tors. 

A.  Determixixg  the  Price  Level  . 

How  should  fzoods  be  priced — at,  above,  or  below  domestic 
market  prices.'  At,  above,  or  I)elow  prices  prevaiHng  in 
world  mark(^ts .' 

B.  Quotation  of  Prices  to  Include  Delivery  Charges. 

Should  prices  be  quoted  f .  o.  b.,  c.  i.  f.,  or  a  variation  of  the 
latter?  How  should  the  policy  vary  with  the  individual 
markets  ? 

Why  is  the  policy  lowaivl  pi-ice  (piotations  of  particular  im- 
portance in  export  trade.' 

C.  Quotation  of  Prices  in  Dollars  verst's  Quotation  in  For- 

eign Currencies  . 

Under  what  conditions  sliould  the  exporter  quote  prices  in 
foreign  currencies  ? 

If  prices  are  quoted  in  foi-eign  currencies,  what  steps  may 
the  exporter  take  in  oi-de)-  to  avoid  loss  through  fluctuation's 
in  exchange  rates  .' 

What  are  the  ad\autages  of  quotation  in  foreign  currency? 


'26S    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

D.  Uniformity  of  Sellino  Price. 

Should  sellin<i'  prices  be  unifonn  for  all  buyers,  re<'ardless  of 
their  classification  as  jobbers,  retailers,  or  consumers? 

Should  selling  prices  be  uniform  for  all  buyers  of  the  same 
class,  regardless  of  credit  standing? 

Should  prices  be  varied  as  between  wholesalers  in  different 
countries  ? 

Should  salesmen  be  allowed  to  cut  prices  in  order  to  meet 
competition  ? 

E.  Trade  Discounts. 

Should  prices  be  quoted  net  or  with  trade  discounts? 

On  what  basis  should  jobbers'  prices  be  granted? 

Should  a  distinction  be  made  between  jobbing  and  retail 
prices  on  the  same  quantity  of  purchase  ? 

Is  it  wise  to  give  jobbers'  discounts  to  large  retail  pur- 
chasers ? 

What  policies  should  be  adopted  toward  cash  discounts? 

F.  Maintenance  op  Resale  Prices. 

Should  the  exporter  attempt  to  fix  resale  ])riees  of  goods  sold 
to  foreign  dealers  .' 

Under  what  conditions  is  it  possible  for  him  to  fix  resale 
prices  ? 

Should  the  exporter  adopt  a  policy  of  refusing  to  sell  to 
price-cutters  ? 

G.  Gttarantee  Against  Price  Decline. 

Should  the  manufacturer  guarantee  his  ])rices  against  de- 
cline l)efoi-e  deliverv  dates? 


PRICE  POLICY  269 

Problem  64 

The  Vandermann  Shoe  Company — Determination   of 
Price  Level* 

The  Vandermann  Shoe  Company,  located  in  Brock- 
ton, Massachusetts,  has  a  maufacturing  capacity  of  9,- 
000  pairs  of  men's  and  women's  shoes  per  day.  The 
company  has  for  a  number  of  years  distributed  its  prod- 
ucts in  about  equal  proportions  through  its  own  stores 
and  exclusive  retail  agencies  in  the  domestic  market. 
The  proportion  of  its  production  (about  20%)  which  it 
has  exported  has  been  sold  entirely  through  exclusive 
agencies  in  cities  of  importance.  Up  to  the  slump  of 
1920  the  company  depended  fully  as  much  upon  its 
agencies  as  upon  its  own  stores  to  furnish  an  outlet  for 
its  product,  but  the  various  cancellations  and  credit 
losses  through  agents  suffered  during  the  earlier  part 
of  the  period  of  depression  has  led  to  a  reconsideration 
of  distribution  policy.  The  decision  was  made  to  con- 
centrate, as  far  as  the  domestic  market  was  concerned, 
almost  entirely  upon  distribution  through  the  company's 
own  retail  stores,  retaining  only  a  very  few  domestic 
exclusive  agencies.  Whether  this  policy  is  to  be  extended 
to  the  export  market  or  not  has  yet  to' be  determined. 

Closely  connected  mth  the  decision  to  concentrate  on 
their  own  stores  Avas  the  adoption  of  a  new  price  policy. 
In  the  past  the  company  has  advertised  extensively  and 
has  not  infrequently  advertised  the  prices  at  which 
its  shoes  were  supposed  to  be  sold.  These  prices  Avere 
usually  not  far  from  the  level  at  which  retailers  pur- 
chasing shoes  of  similar  grade  from  other  manufactur- 
ers were  accustomed  to  quote.  This  of  course  is  not  sur- 
prising, in  view  of  the  fact  that  the  Vandermann  Company 

*Upon  the  economic  aspects  of  price,  see  tlie  standard  works  upon  eco- 
nomic tlieory  particularly  the  portions  devoted  to  a  discussion  of  value 
Discussions  of  price  in  export  trade  may  be  found  in  Vedder,  American 
Methods  vn  F<y,-eujn  Trade,  Chap.  XI;  Wolfe,  Theory  and  Practiee  of 
International  Trade,  Chap.  XII;  Hellauer,  Welthandelslehre,  page  332- 
Irving  National  Bank,  Trading  with  the  Far  East,  pages  88-94  and  Trad- 
ing with  Latin  America  (by  E.  B.  Filsinger),  pages  83-86;  and  Clereet 
Manuel  d 'Economic  Commerciale,  Chap    IV  '  s    > 


270    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

was  compelled  to  allow  as  large  a  margin  for  retailers 
as  the  other  companies  and  the  company  was  at  no  dis- 
tinct advantage  in  regard  to  costs  in  so  far  as  these 
were  represented  by  labor,  machinery,  and  raw  mate- 
rials, although  the  company  had  enjoyed  good  manage- 
ment. The  president  of  the  company,  in  deciding  upon 
the  radical  change  of  policy  in  regard  to  domestic 
agencies,  believed  that  through  manufacturers'  retail 
outlets  it  would  be  possible  to  sell  more  cheaply  and  if 
this  benefit  were  passed  on  to  the  public,  the  increased 
demand  would  augment  sales  so  as  to  cut  down  costs 
and  give  the  company  a  reasonable  profit.  As  a  conse- 
quence, the  policy  definitely  adopted  was  that  of  quoting 
a  uniform  price  in  all  its  stores  and  exclusive  agencies, 
such  prices  on  the  different  shoes  varying  from  50c  to 
$2.50  per  pair  below  those  on  similar  shoes  of  retailers 
handling  other  brands. 

In  establishing  stores  in  London  and  Paris,  in  accord- 
ance with  plans  made  several  years  ago,  should  this 
price  policy  be  applied?  If  the  same  retail  prices  are 
quoted  or  prices  that  are  very  close  to  the  domestic 
prices,  they  will  be  insufficient  to  allow  the  ordinary  re- 
tailer an  attractive  margin  of  profit.  Furthermore,  the 
adoption  of  such  a  price  policy  may  cause  complications 
with  the  exclusive  agencies  in  other  countries.  The 
question  has  arisen  as  to  whether  the  foreign  market 
should  not  be  treated  as  a  market  by  itself,  irrespective 
of  the  domestic  market,  and  the  old  policy  of  quoting 
about  on  a  parity  with  prices  of  other  manufacturers 
be  continued. 


Problem  65 

Chandler  Company — Price  Competition 

As  a  convenience  to  their  Argentine  customers  the 
Chandler  Company,  as  well  as  other  American  manufac- 
turers, of  screws,  bolts  and  nuts,  follows  the  trade  cus- 
tom of  quoting    prices    for    the    Argentine    market    in 


PRICE  POLICY  271 

francs.  Before  the  World  War,  when  rates  of  exchange 
were  stable,  there  was  no  difficulty  in  using  the  French 
price  list,  but  when  rates  of  exchange  began  to  fluctuate 
the  company  found  that  the  quotations  of  its  product 
might  be  materially  changed  over  night  and  the  changes 
in  price  lists  could  not  be  made  rapidly  enough  to  keep 
up  with  the  change  in  the  value  of  the  franc.  Not  wishing 
to  assume  the  risk  of  violent  fluctuations  in  exchange 
rates,  although  continuing  to  follow  its  policy  of  quot- 
ing its  prices  in  francs,  the  Chandler  Company  put  a  pro- 
visional clause  in  its  price  list  that  the  franc  prices  were 
to  be  accepted  only  at  the  par  value  of  the  franc;  that  is, 
at  19.3c.  By  establishing  a  definite  value  for  the  franc 
the  Chandler  Company  was  in  effect  quoting  prices  in 
dollars  and  cents  while  still  using  the  French  list. 

Prior  to  the  war  the  Franklin  Company,  a  competitor 
of  the  Chandler  Company,  spent  a  large  amount  of  money 
in  developing  the  Argentine  market,  establishing  its 
own  salesforce,  and  aggressively  pushing  its  sales.  When 
the  United  States  entered  the  war  in  1917,  the  Franklin 
Company  abandoned  the  Argentine  market  temporarily 
in  order  to  take  care  of  the  greatly  increased  home  de- 
mand. 

On  the  other  hand,  the  Chandler  Company  not  only 
filled  its  government  contracts  and  the  demands  of  its 
customers  in  the  United  States,  but  also  exported  sub- 
stantial quantities  of  bolts  to  Argentina.  The  buyers  in 
the  South  American  countries,  cut  off  by  the  war  from 
British,  French,  German  and  Belgian  sources  of  sup- 
ply, consequently  placed  large  orders  with  the  Chandler 
Company.  In  the  two  years  immediately  follo^\ing  the 
signing  of  the  armistice  the  Chandler  Company  contin- 
ued to  develop  this  market  and  supplied  over  507o  of  the 
bolts  being  shipped  from  the  United  States  to  the  River 
Plate  region.  Deliveries  were  prompt,  selling  prices  sat- 
isfactory, and  the  firm  was  adequately  represented  by  a 
strong  sales  organization. 

With  the  falling  oft'  in  domestic  demand  in  the  fall  of 
1920,  the  Franklin  Company  again  found  itself  in  a  po- 
sition to  export  its  product,  but  it  had  lost  its  hold  upon 


272    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  Argentine  market.  This  corporation  decided,  there- 
fore, to  attempt  to  regain  its  former  position  in  the 
River  Plate  region  by  cutting  the  price  on  its  product 
in  order  to  undersell  its  rivals.  The  method  adopted 
was  to  quote  the  same  price  in  francs  as  that  quoted  by 
the  other  companies,  but  instead  of  requiring  the  francs 
to  be  converted  at  par  the  Franklin  Compan}'  allowed 
the  conversion  to  be  made  at  the  current  rate  of  exchange 
in  Paris.  By  adopting  such  tactics  the  company  was  ac- 
tually selling  its  product  at  a  loss,  but  it  hoped  to  re- 
cover at  least  a  part  of  this  loss  by  holding  francs  in- 
stead of  American  dollars  with  the  expectation  that  the 
rate  of  exchange  would  imi)r()ve  and  the  value  of  the 
franc  would  increase. 

Later,  in  order  partially  to  otfset  the  heavy  loss,  the 
Fi-anklin  Company  quoted  its  prices  with  a  25%  pre- 
mium, whereas  the  Chandler  Company  quoted  a  15%  dis- 
count. As  shown  by  the  following  example,  if  the  cur- 
rent value  of  the  franc  were  .071  the  Franklin  Company 
would  be  selling  its  bolts  at  approximately  half  the  price 
charged  by  the  Chandler  Company. 

Chandler  Company  Franklin  Company 

100  franes:=]ist    price    quoted  .100  franes=]ist   price   quoted 

lo  franc  S3: 15%   discount  25  francs=2;j9c    premium 

85  francs = actual  price  quoted.  125  francs=r:actual   price   quoted 

.193  par   exchange.  .071  current  exchange  rate 


$16,405  $8,875  value  in  United  States  currency 

It  is  evident  that  this  price  policy  of  the  Franklin 
Company  has  been  adopted  in  order  to  drive  the  other 
American  firms  out  of  the  Argentine  market,  since  these 
price  reductions  are  not  necessary  in  order  to  compete 
with  the  products  of  German,  Fnglish,  and  Belgian 
firms.  Its  large  reserve,  built  up  during  tlie  war,  will 
probably  enable  it  to  carry  on  such  competition  for  a 
considerable  period. 

One  of  the  pro])osed  methods  of  mcH'ting  this  competi- 
tion under  consideration  b.y  the  Chandler  Company  is  to 
fix  an  arbitrary  rate  of  15c,  instead  of  19.3c,  for  con- 
verting francs  into  American  cun-ency.    By  confining  or- 


PRICE   POLICY  273 


ders  as  far  as  possible  to  the  sizes  on  which  there  is  the 
greatest  profit  it  is  expected  that  under  this  plan  the 
company  ,nll  be  able  to  meet  the  competition  of  its  ri! 
ti  «"";?■',  'ty'^^e  at  first  might  be  slightly  higher 
than  that  ot  the  Franklin  Company,  as  the  rate  of  ex- 
change advanced  nearer  to  par  the  prices  of  the  t.vo 

the  Chandler  Company  would  probably  begin   to  take 
away  business  from  its  competitor 

Another  proposal  is  to  do  away  with  the  old  custom  of 
quoting  pnees  m  francs  and  instead  to  quote  then 
American  dollars.  This  would  relieve  the  companv  of 
much  ot  the  bother  of  considering  exchange  Zl\t 
del  Ins  scheme  the  company  would  establish  a  price 
which  would  cover  all  expenses,  altliough  it  mioh  not 
show  a  profit.    On  this  basis  the  salesme!,  of  tl le  C   a  d 

he  ^:r  "°;-"  '"  '"*"  "'«  ^■°-'«-^  niarkrt  w  1 1 
the  Idea  ot  meeting  reasonable  price  competition  and 
of  .miphasizing.  the  superior  qualitv  of  the  product  ^ 
the  Chandler  Company.  '  pioauct  ot 

The  thii-d  plan  under  consideration  is  to  withdraw 
from  the  Argentine  market  entirelv.  South  American 
buyers  require  metric  lengths  and  diameters   4Tch  dff 

mirke?"      '  ''"''T'^  "'^'^  '^'''  '-^^  '"  t he    lo  nesti^' 
maiket;  consequently,  machines  must  be  changed  in  o  ■ 

del   to  manufacture  goods  for  export  and  the  cost  of 

production    is  therefore    slightly    higher    than    tlia    of 

goods  manufactured   for  the  American  maXt      This 

itelirff    ?""/'"  ^'"''"'"^''  Compnii,    .tllld  d  ! 
ote  all  Its  eftoi-   and  resources  to  developing  the  domes 

ic  market  winch  is  free  from  German  c^mrx^tUion  to  a 
g.eaer  extent  than  are  the  markets  of  South  Am  rila 

p-,m    wirre'-'     T^'•^'  r'^P*-'''  ^y  «'«  Chandler  Oom- 
p.^n^   ivith  regard  to  its  Argentine  market' 


271    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  66 

Guild  Company — Adjustments 

The  Guild  Company  has  recently  received  letters  from 
several  of  its  South  American  customers  with  refusals 
to  accept  the  goods  unless  the  selling  price  was  reduced 
50%.  It  was  claimed  that  competitors  had  bought  cheaper 
merchandise  from  other  hrms;  consequently  Guild 
Company's  goods  could  not  be  sold  unless  invoice  prices 
were  greatly  reduced.  One  of  the  customers,  Mr.  Fer- 
nandez, a  retail  dealer  in  Chile,  located  about  two-hun- 
dred kilometers  from  Valparaiso,  ordered  $632  worth  of 
merchandise  at  regular  prices  quoted  in  American  dol- 
lars, f.  0.  b.  mill.  The  shipment  has  now  arrived  in  his 
city  but  he  has  notified  the  company  that  he  mil  neither 
pay  for  the  goods  nor  the  freight  charges  on  them  un- 
less the  company  makes  him  an  allowance  of  50%. 

The  Guild  Company  manufactures  an  assortment  of 
colored  crepe  jDaper,  the  annual  production  of  which 
amounts  to  $9,000,000.  It  exports  approximately  one- 
eighth  of  this  amount,  but  only  $200,000  worth  goes  to 
South  America.  The  company  has  not  established  its 
own  warehouses,  since  the  sales  volume  of  its  product 
in  this  market  is  insufficient  to  warrant  such  a  step.  It 
is  distributing  its  merchandise  directly  through  its  sales- 
men, who  call  upon  customers  about  once  every  sixmonths. 
The  salesman  therefore  has  but  little  opportunity  to 
assist  the  dealer  in  selling  his  crepe  paper  after  the  ship- 
ment has  arrived,  neither  has  he  an  opportunity  to  in- 
vestigate claims  for  adjustment  and  statements  of  cut- 
price  competition. 

The  customers  who  have  asked  the  company  to  reduce 
its  price  after  the  goods  have  arrived  are  usually  located 
away  from  the  big  ports  and  centers  where  the  ship- 
ments cannot  be  diverted  to  other  customers.  They  have 
never  handled  the  company's  product  before,  and  their 
initial  orders,  covering  their  requirements  for  full 
stocks,  are  therefore  comparatively  large,  usually  being 
for  $500,  $600  or  $700  worth  of  merchandise.    It  is  appar- 


PRICE  POLICY  275 

eiit  that  most  of  these  customers  are  trying  to  take  ad- 
vantage of  the  fact  that  the  Guild  Company  is  several 
thousand  miles  away  and  has  no  representative  on  the 
ground  to  look  after  its  interests.  An  investigation  of 
one  or  two  cases  has  shown  that  no  such  competition  ex- 
ists as  has  been  claimed.  These  customers  evidently  be- 
lieve that  rather  than  pay  the  freight  both  ways,  as  well 
as  high  warehouse  charges,  the  company  will  accede  to 
their  demands. 

In  securing  these  orders  the  company  has  already 
had  to  pay  high  salaries  and  heavy  expenses  to  its  sales- 
men and  has  frequently  gone  to  some  additional  expense 
and  trouble  in  order  to  furnish  the  sizes  required.  This 
business  already  yields  no  profit,  and  if  the  company 
allows  the  reductions  asked  it  must  stand  an  absolute  loss 
of  50%  on  each  order.  The  merchants  thus  favored,  how- 
ever, would  undoubtedly  push  the  sale  of  these  goods  be- 
cause of  the  large  profit  they  would  make.  If  the  merchan- 
dise were  once  introduced  to  these  dealers'  customers  the 
quality  of  Guild  Company  goods  is  such  that  a  future 
demand  is  almost  sure  to  be  created.  When  the  sales- 
man calls  on  these  dealers  in  a  few  months  for  repeat 
orders,  he  will  be  in  position  to  demand  some  adjustment 
on  the  first  shipment  and  the  company  may  recover  at 
least  a  part  of  its  loss. 

The  Guild  Company  has  always  maintained  a  stiff  col- 
lection policy.  To  grant  such  unreasonable  requests 
would  encourage  other  customers  to  make  unwarranted 
demands  in  the  future.  Although  the  salesmen  have  re- 
ported these  dealers  as  the  largest  and  most  prosper- 
ous in  the  towns  in  which  they  are  located,  there  is  some 
question  as  to  whether  the  company  would  care  to  have 
its  goods  handled  by  merchants  who  employ  such  ques- 
tionable buying  tactics. 

If  the  requests  are  turned  down,  however,  it  is  almost 
certain  that  these  merchants  will  refuse  to  handle  Guild 
Company's  merchandise  in  the  future  and  may  even  try 
to  discourage  others  from  buying  its  goods.  At  a  time 
when  the  company  is  making  special  efforts  to  extend  the 


276    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

use  of  its  product  in  South  America,  it  would  be  inad- 
visable to  create  enemies.  Since  the  price  was  quoted 
f,  o.  b.  mill,  the  company  must  go  to  the  added  expense 
cf  paying  the  freight  to  South  America,  It  must  also 
either  pay  return  freight,  or  the  high  Avarehouse  charges 
for  storing  the  merchandise  in  the  hope  that  some  day 
another  customer  can  be  found.  Whether  the  merchan- 
dise is  stored  or  returned,  it  is  not  being  sold  to  the 
trade  and  future  demand  is  not  being  created. 

What  action  should  the  Guild  Company  take  with  re- 
gard to  the  requests  of  these  South  American  customers! 


Problem  67 

The  Wolfe  Company — F.  0.  B.  versls  C.  I.  ¥.* 

The  question  of  the  method  to  be  used  in  quoting 
prices  has  arisen  in  connection  with  the  plan  of  the 
Wolfe  Company  to  increase  its  export  trade  in  textile 
machine  accessories  and  supplies.  At  present  the  com- 
pany distributes  its  product  in  the  foreign  field  mainly 
through  agents  who  are  given  definite  territories  to  cov- 
er, but  in  the  new  territories  the  company  is  beginning 

*For  gener.'il  descTi[)tiuii  and  discussion  of  export  practice  and  price 
quotation,  cf.  the  nianunl  of  export  terms  published  by  the  National  For- 
eign Trade  Council  in  collaboration  with  various  other  associations,  portions 
of  which  are  quoted  below.  Discussions  of  practices  in  particular  trades 
are  to  be  found  in  Sonnendorfer-Ottel,  Tcchnik  des  WeUhandel,  Volume  II; 
and  in  other  manuals  of  continental  origin.  Ilellauer,  in  discussion  of 
prices  on  pages  332  et  seq.  of  his  W eltJiandelslehrc,  which  Wolfe  follows 
very  closely  (Chap.  XII  of  his  Theory  and  Practice  of  International 
Trade)    discusses   price   quotations   with   the   following  headings: 

"A.  The  meaning  of  price. 

B.  The  quotation. 

(a)  Meaning  of  quotation. 

(b)  Price  basis  and  allowances  relating  to  the  quality  and  quantity 
of   goods. 

(c)  The  i)r)ce  denomination. 

(d)  Tlie  time  basis  of  price  calculation. 

(e)  Discounts  and  rebates. 

(f)  The  costs   of  trnnsjiortation,   insurance,   and   incidentals   as   ele- 
ments of  the  quotation. 

(g)  Cash  terms, 
(h)   Credit  terms." 


PRICE  POLICY  277 

to  deal  direct  Avitli  eacli  mill  owner  through  the  com- 
pany's own  salesmen.  The  price  to  the  agents  has  al- 
ways been  quoted  f.  o.  b.  steamer,  New  York.  Not  a  few 
of  the  company's  agents  prefer  this  method  because  it 
gives  them  the  opportunity  to  handle  all  papers  and  doc- 
uments in  their  own  way  or  to  delegate  this  work  to 
friends.  In  any  case  the  agent  is  familiar  with  importing 
merchandise  into  his  native  country  and  it  is  compara- 
tively easy  for  him  to  sit  down  and  figure  out  the  amount 
the  goods  will  cost  him  delivered  at  his  own  warehouse. 
In  dealing  Avith  mill  owners,  however,  there  is  consider- 

Tlie  following  items  and  charges  should  be  taken  into  consideration  in 
calculating  prices,  according  to  The  Technique  of  Foreign  Trade  (anony- 
mous) : 

"(1)    Buying  expenses. 

Commission  and  brokerage  to  intermediaries,   etc. 

(2)  Keeping  and  handling  expenses. 

Storage,    fire    insurance,    sampling,    testing,    conditioning,    sorting, 
repairs,  packing,  etc. 

(3)  Forwarding  expenses. 

Delivery,  carriage  by  land  or  water  or  both,  dock  and   river  dues, 
consulage,  wharfage,  insurance  during  transit,  etc. 

(4)  Fiscal  and  other  dues. 

Customs   duties,   consumjition   taxes,   etc. 

(5)  Financial   items  incidental  to  reimbursements. 

Loss  on  exchange,  bill  brokerage,   bank  commissions,   etc. 

(6)  Selling  expenses. 

Factorage  and  brokerage  to  intermediaries,  discount  for  cash,  etc. 

(7)  Customary  allowances  for  tare,  draft,  breakage,  leakage,  deteriora- 
tion, wastage,  shortage,  damage,  etc. 

(8)  Miscellaneous  items. 

Traveling   expenses,    advertising,    cablegrams,    petties,    etc. 

(9)  Interest  on  invested  capital  for  time  being. 

(10)  Contribution   to   general  expenses,  known  as  'office  overhead.' 

(11)  Allowance   for  contingencies   and   unforeseen  expenses. 

(12)  Selling   risk,   when   goods    are   to   be    sold    on    credit    or    for    future 
delivery  or  both. 

The  calculator  of  riuotations  for  export  must  be  thoroughly  posted  on 
the  following  jioints : 

(1)  The  meaning  of  his  buying  price. 

(2)  The  way  in  wliicdi  his  customer  wants  him  to  quote. 

(3)  The  intervening  items  and   expenses. 

(4)  The  points  by  wliich  iirices  jiroceed,  botli  at  home  and  abroad;  i.e., 
the  difference  between  a  given  i)rice  and  the  next  higher  or  lower 
one. 

(^)  The  extent  to  wliicli  goods  may  be  affected  in  their  volume,  weight, 
quality   or   condition   during   transportation    or   while   in   storage. 

(6)  The  degree  of  correctness  needed  in  his  conversion  factors  in  case 
the  required  quotation  is  for  foreign  measure." 


278    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

a.ble  question  as  to  wlu'tlicr  prices  should  still  be  quoted 
f.  o.  b.  or  e.  i.  f. 

Most  of  the  AVolt'e  Company's  salesmen  favor  quoting 
all  prices  c.  i.  f.  A  la  rye  number  of  mill  owners  in  foreign 
countries  liave  had  but  little  exi)erience  in  importing  and 
consequently  they  are  not  familiar  with  the  custom  duties, 
freight  rates,  and  insurance  rates.  It  is  difficult  there- 
fore, if  not  impossible,  for  such  customers  to  take  the  f. 
o.  b.  quotation  given  them  by  the  AVolfe  Company's  sales- 
men and  convert  this  amount  into  the  price  at  which  the 
accessories  or  supplies  can  be  laid  dovni  on  the  floor  of 
their  factories.  Furthermore,  they  do  not  care  to  be 
bothered  with  all  the  shipping  and  consular  requirements, 
nor  do  they  like  to  entrust  this  work  to  outsiders.  The 
salesmen  report  also  that  the  field  is  highly  competitive, 
that  German  and  English  companies  usually  quote  their 
prices  c.  i.  f.,  and  that  unless  the  Wolfe  Company  quotes 
its  prices  on  the  same  basis  they  will  not  be  able  to  com- 
pete successfully  with  salesmen  of  rival  companies. 

The  company  has  used  f .  o.  b.  quotations  in  the  past  be- 
cause by  requiring  cash  against  documents  in  New  York 
City  it  is  able  to  transact  its  foreign  business  with  but 
slightly  different  routine  than  it  uses  in  its  domestic 
business,  and  it  is  thereby  relieved  of  the  red  tape  and 
petty  troubles  sometimes  incident  to  handling  foreign 
shipments  on  a  c.  i.  f.  basis.  Furthermore,  a  salesman 
is  often  unable  to  give  an  exact  c.  i.  f.  price  quotation  be- 
cause it  may  vary  for  every  port  which  he  visits.  The 
situation  is  further  complicated  in  some  countries  by  the 
rapid  fluctuations  in  the  rate  of  exchange.  Prices  quoted 
in  American  dollars,  even  on  a  c.  i.  f.  basis  might  change 
overnight  because  a  change  in  the  exchange  rate  affected 
the  cost  of  insurance  and  service  rates.  There  is 
also  danger  that  in  order  to  meet  competitive  in'ices 
salesmen  may  try  to  figure  c.  i.  f .  prices  a  little  too  closely, 
with  the  result  that  the  comj)any  may  find  itself  losing 
a  part  of  its  profits.  For  these  reasons  a  number  of  com- 
panies refuse  to  quote  prices  on  a  c.  i.  f.  basis,  preferring 
to  have  all  their  foreign  business  done  f.  o.  b. 


PRICE  POLICY  279 

111  developing  its  foreign  trade  the  "Wolfe  Company 
believes  that  the  time  has  come  when  it  should  deal  direct 
with  the  customers  rather  than  through  a  third  person. 
Consequently,  no  new  agencies  are  being  established  in 
new  territories  and  contracts  with  old  agencies  are  not 
being  renewed.  At  present  the  company's  annual  sales 
volume  is  approximately  $3,500,000,  of  which  exports 
amount  to  32%.  By  dealing  direct  mth  the  foreign 
mill  o^\aiers  through  the  company's  own  salesmen  it  is 
hoped  to  increase  the  amount  of  foreign  trade  business 
to  40%. 

Which  policy  should  the  Wolfe  Company  adopt  in 
quoting  its  prices  to  foreign  mill  o'waiers? 


Problem  68 

The  Carlton  Drug  Company — Quoting  Net  Prices  in  Dollars 

F.  0.  B.  Seaboard  versus  Quoting  List  Prices  in 

Foreign  Currencies  C.  I.  F.* 

Previous  to  the  World  War  the  Carlton  Drug  Com- 
pany quoted  its  prices  in  sterling  not  only  in  Great  Brit- 
ain but  also  on  the  continent  of  Europe  and  in  Latin 
America;  it  had  found  it  easier  to  effect  its  exchange 
transactions  through  the  London  money  market  rather 
than  directly  with  the  countries  in  which  it  sold.  Begin- 
ning with  the  outbreak  of  the  war  and  continuing  to  the 
present  time,  the  company  has  been  quoting  net  prices 
in  dollars,  f.  o.  b.  seaboard.  Although  many  of  the 
firm's  customers  are  apparently  satisfied  with  this  method, 
of  late  the  company  has  received  a  number  of  re- 
quests for  c.  i.  f.  quotations  in  foreign  currencies,  and 
its  salesmen  report  that  not  a  few  foreign  merchants 
prefer  list  price  quotations  vdih  a  string  of  trade  dis- 
counts to  a  net  quotation.  This  situation  has  given  rise 
to  a  number  of  questions. 

*Adclitioiial  iiifonniition  may  be  obtained  from  Dudeuey,  The  Exporter's 
Handboolc  and  Glossary,  Chap.  XXIV;  Hough,  Practical  Exporting,  pages 
327-334;  De  Haas,  Foreign  Trade  and  Shipping,  Part  I,  Chap.  VIII;  and 
Miscellaneous  Series  No.  81,  Chap.  XII. 


280    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

What  method  of  price  quoting  will  secure  the  most 
orders  ? 

Should  the  Carlton  Company  continue  to  quote  prices 
in  American  dollars  or  should  it  quote  in  foreign  cur- 
rencies! In  the  former  event  should  the  company  ac- 
cept the  conversion  of  American  dollars  into  foreign 
currency  at  the  rate  of  exchange  prevailing  on  the  date 
the  order  is  taken,  on  the  date  the  goods  are  shipped,  or 
when  the  goods  arrive  at  the  foreign  port  ?  How  should 
it  treat  requests  for  quotations  in  foreign  currencies?  If 
prices  are  quoted  in  foreign  currencies  should  the  com- 
pany hedge  the  order  on  exchange  or  should  it  quote  its 
prices  high  enough  to  cover  the  risk  of  fluctuating  ex- 
change rates  I  If  the  first  method  is  adopted  should  the 
company  authorize  its  salesmen  or  agents  to  hedge  the 
order  at  the  time  it  is  taken,  should  it  wait  until  the  or- 
der is  received  through  the  mail  at  the  home  office,  or 
should  the  company  anticipate  its  orders  by  hedging  in 
advance!  If  orders  are  anticipated  how  should  the  com- 
pany drlermine  the  amount  of  orders  to  hedge! 

Should  the  quotation  be  f.  o.  b.  seaboard  or  c.  i.  f. !  *  In 
the  latter  event  should  separate  price  lists  be  made  up 
for  each  foreign  port  or  should  each  quotation  be  fig- 
ured separately!     Should  salesmen  be  paid  a  commis- 

*].  When  the  price  quoted  a})plies  only  at  inland  shipping  point  and 
the  seller  merely  undertakes  to  load  the  goods  on  or  in  ears  or  lighters 
furnished  by  the  railroad  company  serving  the  industry,  or  most  conve- 
niently located  to  the  industry,  witiiout  other  designation  as  to  routing,  the 
proper  term  is : 

"F.  O.  B.    (named   point)  " 
Under   this   quotation : 

A.  Seller  must 

(1)  place  goods  on  oi'  in  cars  or  lighters 

(2)  secure  railroad   bill   of  lading 

(3)  be  responsible  for  loss  and/or  damage  until  goods  have  been 

placed  in  or  on  cars  or  lighters  at  forwarding  point,  and 
clean  bill  of  lading  has  been  furnished  by  the  railroad 
company. 

B.  Buyer  must 

(1)  be   responsible   for    loss    atul/or    damage    incurred    thereafter 

(2)  pay   all  transportation    cliarges    including   taxes,   if  any 

(3)  handle  all   suljsefiucnt    niovenicnt  of  the  goods. 

2.  When  the  seller  cpiotes  a  price  including  t raiisi)ortation  charges  to  the 
port  of  exportation  without  assuming  resi)onsibiIity  for  the  goods  after 
obtaining  a  clean  bill  of  lading  at  point  of  origin,  the  proper  term  is: 


PRICE   POLICY  281 

sioii  on  c.  i.  f.  prices  or  should  all  coiiimis.sioiis  be  figured 
on  the  factory  price? 

Should  net  prices  or  list  prices  be  quoted '!  In  case  the 
latter  method  is  used  and  it  is  decided  to  quote  c.  i.  f.,  how- 
can  discounts  be  figured?  On  what  basis  should  the  sales- 
men be  paid  their  commissions  '! 

How  long  should  quotations  be  allowed  to  stand? 
Should  quotations  in  foreign  currencies  be  made  by  let- 
ter or  should  they  be  made  by  cable  ? 

If  sterling  returns  to  ])ar  in  the  near  future,  should 
the  Carlton  Company  retui'n  to  its  prior  practice  of 
quoting  prices  in  sterling? 

The  Carlton  Company  sells  drugs,  patent  medicines, 
and  other  medical  i)reparations  through  its  own  sales- 

"F.   O.   B.    (luiiiK'd   iioint)    FEEIGHT   PEEPAID   TO    (nniiiod 
point   on  the  seaboard)" 

Under   tliis   quotation: 

A.  Seller  must  * 

(1)  place  goods  on  or  in  cars  or  lighters 

(2)  secure  railroad   bill   of   lading 

(3)  pay  freight  to  named  port 

(4)  be  responsible  for  loss  and/or  damage  until  goods  liavc  been 

placed  in  or  on  cars  or  lighters  at  forwarding  ])oint,  and 
clean  bill  of  lading  has  been  furnished  by  the  railroad 
company 

B.  Buyer  must 

(1)  be   responsible   for  loss   and/or  damage  incurred   theieaftcr 

(2)  handle  all  subsequent  movement  of  the  goods 

(3)  unload  goods  from  cars 

(4)  transport  goods  to  vessels 

(5)  pay  all  demurrage  and/or  storage  charges 

(6)  arrange  for  storage  in  warehouse  or  on  wharf  where  neces- 

sary 

3.  Where  the  seller  wishes  to  quote  a  price,  from  wliich  tlie  ])uyer  may 
deduct  the  cost  of  transportation  to  a  given  point  on  the  seaboard."  without 
the  seller  assuming  responsibility  for  the  goods  after  obtaining  a  clean 
bill  of  lading  at  point  of  origin,  the  proper  term  is: 

"F.  O.  B.    (named  point)   FREIGHT  ALLOWED  TO 
(named    point   on   the   seaboard)" 
Under  this  quotation: 
A.  Seller  must 

(1)  place  goods  on  or  in  cars  or  lighters 

(2)  secure  railroad  bill   of  lading 

(3)  be    responsible    for    loss    and/or    damage    until    goods    have 

been  placed  in  or  on  cars  or  lighters  at  forwarding  point, 
and  clean  bill  of  lading  lias  been  furnished  by  the  rail- 
road   company 


282    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

men  and  agents,  who  are  usually  paid  a  commission  on 
their  net  sales.  These  representatives  sell  directly  to  the 
large  drug  stores  and  wholesalers,  their  orders  varying 
A^ddely  in  number  of  items  and  volume.  At  the  present 
time  the  company  is  well  represented  by  salesmen  and 
agents  in  Canada,  Mexico,  Cuba,  Porto  Rico,  Central 
America,  Venezuela,  Colombia,  Brazil,  Argentina,  Chile, 
Great  Britain,  France,  Italy,  Australia,  New  Zealand, 
Japan  and  India. 

By  quoting  prices  in  dollars  the  company  has  avoided 
the  necessity  of  changing  its  prices  frequently  in  order 
to  prevent  loss  from  exchange  fluctuations.  It  has  thus 
been  able  to  make  quotations  and    publish    price    lists 

B.  Buyer  must 

(1)  be  responsible  for  loss  aud/or  damage  incurred  thereafter 

(2)  pay   all   transportation   charges    (buyer   is   then    entitled   to 

deduct   from  the  amount  of  the  invoice  the  freight  paid 
from  primary  point  to  named  port) 

(3)  handle  all  subsequeut  movement  of  the  goods 

(4)  unload  goods  from  cars 

(5)  transport   goods   to   vessel 

(6)  pay  all  demurrage  and/or  storage  ciiarges 

(7)  arrange  for  storage  in  Avarehouse  or  on  wharf  where  neces- 

sary 

4.  Tlie  seller  may  desire  to  quote  a  price  covering  the  transportation  of 
the  goods  to  seaboard,  assuming  responsibility  for  loss  and/or  damage  up 
to  that  point.     In  tliis  case,  the  proper  term  is : 

"F.  O.  B.  Cars   (named  point  on  seaboard)" 
Under  this  quotation : 

A.  Seller  must 

(1)  place  goods   on  or   In  cars 

(2)  secure  railroad  bill  of  lading 

(3)  pay  all   freiglit   charges   from   forwarding   point  to   port  on 

seaboard 

(4)  be    responsible    for    loss    and/or    damage    until    goods    have 

arrived  in  or  on  cars  at  the  named  port 

B.  Buyer  must 

(1)  be   responsible   for   loss   and/or   damage   incurred   thereafter 

(2)  unload   goods  from  cars 

(3)  handle  all  subsequent  movement  of  the  goods 

(4)  transport  goods  to  vessel 

(5)  pay  all  demurrage  and/or  storage  charges. 

(6)  arrange  for  storage  in  warehouse  or  on  wharf  where  neces- 

sary 

5.  It  may  be  that  the  goods,  on  which  a  price  is  quoted  covering  the 
transjiortation  of  the  goods  to  seaboard,  constitute  less  than  a  carload 
lot.     In  this  case,  the  proper  term  is: 

"F.  O.  B.  Cars   (named  port)   L.  C.  L. " 


PRICE  POLICY  283 

which  have  held  for  an  extended  period.  Since  the  com- 
pany pays  for  all  supplies  and  labor  in  dollars,  by  quot- 
ing its  prices  in  the  same  currency  it  can  determine  at 
once  the  amount  of  prof  t  it  will  receive  on  any  sale, 
niodified,  of  course,  by  losses  because  of  bad  debts  and 
interest  on  extensions  of  credit.     Many  customers  pre- 

Under  this  quotation: 

A.  Seller  must 

(1)  deliver  goods  to  the  initial  carrier 

(2)  secure  railroad  bill  of  lading 

(3)  pay   all   freight   charges   from   forwarding  point  to   port   on 

seaboard 

(4)  be  responsible  for  loss  and/or  damage  until  goods  have  ar- 

arrived  on  cars  at  the  named  port 

B.  Buyer   must 

(1)  be   responsible   for   loss   and/or   damage  incurred   thereafter 

(2)  handle  all  subsequent  movement  of  the  goods 

(3)  accept  goods  from  the  carrier 

(4)  transport  goods  to  vessel 

(5)  pay  all  storage  charges 

(6)  arrange  for  storage  in  warelmuse  or  on  wharf  wliere  neces- 

sary 

fJ^JffW''-'  "^r^u  ""  ^r'^  "u"'^'  '''^^  ^"^'"*1^  "»«  ''-^P<^"se  of  transpor- 
tation of  the  goods  by  rail  to  the  seaboard,  including  lighterage  In  this 
case  the  proper  term  is:  b      h  s--.     j-u  tins 

"F.  O.  B.   Cars    (named  port)    LIGHTERAGE   FEEE " 
Under  this  quotation: 

A.  Seller  must 

(1)  place  goods  on  or  in  cars 

(2)  secure  railroad   bill   of  lading 

(3)  pay^  all   transportation   cliarges   to.   including   liglitera^e  at 

the  port  named  '  *         ' 

(4)  be    responsible    for    loss    and/or    damage    until    goods    have 

arrived  on  cars  at  the  named  port 

B.  Buyer  must 

(1)   be  responsible   for   loss   and/or   damage   incurred   thereafter 
2     handle  all  subsequent  movement  of  the  goods 
{A)   take  out  the  insurance  necess.-n-y  to  the  safetv  of  the  goods 

atter  arrival  on  the  cars  "  s"""^ 

(4)   pay  the  cost  of  hoisting  goods  into  vessel  where  weight  of 

goods  IS  too  great  for  ship's  tackle 

^diarges'^"""""^"    "'"'^    "^*"'    '^''''^'''    '""''^^    lighterage 
7.  The  seller  may  desire  to  quote  a  price  covering  deliverv  of  the  j^ond, 

"F.   A.   S.   vessel    (named  port)" 
Under  this  quotation: 
A.  Seller  must 

(1)  transport  goods  to  seaboard 

(2)  store  goods  in  warehouse   or  on  wharf  if  necessary    unless 

buyer's   obligation   includes   provision   of   sM^ping   facili 


28i    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

fer  to  receive  quotations  in  American  dollars  as  they 
realize  that  the  present  unfavorable  exchange  rates  are 
purely  temporary;  they  hope  that  when  the  time  comes 
to  pay  their  bills,  they  will  be  able  to  make  a  profit  not 
only  on  the  resale  of  the  drugs  but  on  a  rise  in  exchange 
rate  as  well. 

The  company  has  found,  hoAvever,  that  quoting  prices 
in  dollars  encourages  its  customers  to  speculate  on  ex- 
change, with  the  result  that  if    the    rate    goes    against 

(H)    place   goods   iiloiigsido    vessel    eitlier    in    a    liohter    or    on    the 
Avharf 

(4)  provide  the  usual   dock   or  ship's   receipt 

(5)  be  responsible  for  loss  and/or  damage  until  goods  have  been 

delivered  alongside  the  shi])  or  on  wharf 

B.  Buyer   must 

(1)    be    resj)onsible    for    loss    and/or    damage    thereafter,    and    for 
insurance 

(2)  handle  all  subsequent  movement  of  the  goods 

(3)  pay  cost  of  hoisting  goods  into  vessel  where  weight  of  goods 

is  too  gi'eat  for  ship's  tackle 

8.  The  seller  may  desire  to  quote  a  price  covering  all  expenses  up 
to  and  including  delivery  of  the  goods  ujion  the  overseas  vessel  at  a  named 
port.     In  this  case,  tlie  proper  term  is: 

"  F.    O.   P>.    vessel    (named    ]iort)  " 

Under  this  quotation: 

A.  The  seller  must 

(1)  meet  all  charges  incurred   in  |da<dng  goods  actually  on  board 

the  vessel 

(2)  provide  the  usual  dock  or  ship's  receipt 

(3)  be  res])ousible   for  all  loss  and/or  damage   until   goods  have 

been  placed  on  board  tlie  vessel 

B.  Buyer  must 

(1)  be  responsible  for   loss  and/or  damage  thereafter 

(2)  handle  all   subsecpient  movement  of  the   goods 

!t.  The  seller  may  be  ready  to  go  farther  llian  the  deliveiy  of  liis  goods 
u]ton  tlie  overseas  vessel  and  be  willing  to  ])ay  transportation  to  a  foreign 
point   of  delivery.      In  this  case,  the  proper  term  is: 

"C.   &   F.    ''named   foreign   port)'' 

Under  this  (juotation  : 
A.  Seller  must 

(1)  make  freight  contract  and   pay  transportation   charges  suffi- 

cient to   carry   goods   to   agreed   destination 

(2)  deliver   to   buyer   or   his   agent   (lean    hills   of    lading   to   the 

agreed  destination 
(?>)    ])e  res])onsible  for  loss  ami/or  damage  until  goods  liave  been 
delivered  alongside  the  ship  and  clean  ocean  bill  of  lading 
obtained    (seller   is   not    responsible    for   delivery   of   goods 
at  destination) 


PRICE  POLICY  285 

them,  they  are  not  in  position  to  pay  their  drafts  at  ma- 
turity. AVhen  a  merchant  buys  goods  in  dollars  at  a 
price  fixed  several  weeks  before  the  merchandise  arrives, 
he  can  protect  himself  by  selling  futures  in  exchange  to 
cover  the  period  between  the  time  when  his  goods  are 

B.  Buyer   must 

(1)  })e  responsible  for  loss  aiid/or  damage  thereafter  and  must 

take   out   all   necessary   insurance 

(2)  handle  all  subsequent  movement  of  the  goods 

(3)  take   delivery   and   pay   costs   of   discharge,    lighterage,    and 

landing  at  foreign  port  of  destination  in  accordance  with 
bill   of  lading  clauses 

(4)  jjay   foreign  customs  duties   and   wharfage   charges,   if   any 

10.  The  seller  may  desire  to  quote  a  price  covering  the  cost  of  the  goods, 
the  marine  insurance  on  the  goods,  and  all  transportatiou  charges  to  the 
foreign  point  of  delivery.     In  this  case,  the  proper  term  is: 

"('.    1.    F.    (named    foreign    port)" 

Under  this  quotation : 

A.  Seller  must 

(1)  make    freight    contract    and    pay    freight    charges    sufficient 

to  carry  goods  to  agreed  destination 

(2)  take  out  and  pay  for  necessary   marine   insurance 

(3)  deliver  to   huyex  or   his   agent  clean   bills   of   lading  to  the 

agreed  destination,  and  insurance  policy  and/or  nego- 
tiable insurance  certificate 

(4)  be  responsible  for  loss  and/or  damage  until  goods  have  been 

delivered  alongside  the  ship,  and  a  clean  ocean  bill  of 
lading  and  insurance  policy  and/or  negotiable  insurance 
certificate  have  been  delivered  to  the  buyer,  or  his  agent. 
(Seller  is  not  resi)onsible  for  the  delivery  of  goods  at 
destination,  nor  for  payment  by  the  underwriters  of  in- 
surance claims) 

(5)  provide    war    risk    insurance,    where   necessary,    for    buyer's 

account 

B.  Buyer  must 

(1)  be  responsible  for  loss  and/or  damage  thereafter,  and  must 

make  all  claims  to  which  he  may  be  entitled  under  the 
insurance  directly  on  the  underwriters 

(2)  take    delivery    and    pay   costs   of    discharge,    lighterage   and 

landing  at  foreign  port  of  destination  in  accordance  with 
bill  of  lading  clauses 

(3)  pay   foreign   customs   duties    and    wliarfage   charges,    if   any 
•    EXPLANATION   OF   ABBREVIATIONS 

^  •  O-    ^ Free  on  board 

^-  ^-  ^ Free   alongside 

^-  f   J Cost  and  freight 

■  ^-   ^- Cost,  insurance  and  freight 

^'-  ^  •    ^■' Less  than  carload  lot 

In  selling  "F  A.  S.  Vessel"  manufacturers  and  exporters  should  be 
careful  to  have  their  agreements  with  buyers  cover  explicitly  the  question 
ot   responsibility   for   loss   after   goods   liave    been   delivered  'on   the   Avharf 


286    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ordered  and  the  date  that  he  is  able  to  resell  them  to  his 
customers.  As  an  actual  fact,  however,  the  average 
merchant  is  usually  not  familiar  with  the  steps  of  a 
hedging  operation,  and  even  if  he  does  possess  this 
knowledge,  he  rarely  makes  use  of  it,  since  he  hopes 
that  exchange  will  rise  instead  of  fall  and  that  he  will 
thus  be  able  to  make  an  additional  profit. 

It  has  been  suggested  that  the  company  should  remove 
from  the  transaction  this  element  of  gambling  by  ar- 
ranging to  have  the  price  in  dollars  converted  into  for- 

or  alongside  the  vessel  and  before  they  are  actually  loaded  on  the  ship. 
There  is  no  generally  established  practice  on  this  point.     .     .     . 

In  order  to  avoid  confusion  in  another  particular,  attention  is  called  to 
the  care  Avhich  must  be  exercised  in  all  cases  in  making  weight  quotations. 
The  net  ton,  the  gross  ton,  and  the  metric  ton,  all  differ  in  weight.  Simi- 
larly there  is  a  variation  in  the  use  of  the  term  "hundredweight"  to  mean 
either  100  pounds  or  112  pounds.  It  is,  therefore,  not  sufficient  to  quote 
a  price  per  "ton"  or  per  "hundredweight."  Instead  the  Conference 
recommends  the  use  of  the  terms  "ton  of  2,000  lbs.",  ton  of  2,240  lbs.", 
or  "ton  of  2,204  tbs. ",  etc.  whichever  is  intended. 

It  is  also  important  to  note  that  a  carload  lot  in  the  United  States  means 
the  quantity  of  the  particular  commodity  in  question  necessary  to  obtain 
the  carload"  freight  rate  for  transportation  on  American  railways.  This 
quantity  varies  according  to  the  commodity  and  also  varies  in  different 
parts  of  the  country.  Certain  commodities  being  more  bulky  than  others, 
the  minimum  carload  for  them  is  less  than  for  heavier  products  occupying 
less  space.  The  load  required  may  range  anywhere  from  12,000  to  90,000 
pounds.  Consequently  it  is  important,  when  quotrng  prices  applicable  to 
carload  lots,  to  so  state  and  to  specify  the  minimum  weight  necessary  to 
make  a  carload  lot  of  the  particular  commodity  for  the  particular  ship- 
ment m  question. 

In  quoting  "  C.  &  F. "  or  "  C.  I.  F. ",  manufacturers  and  exporters 
moving  large  quantities  of  material  by  one  vessel  should  be  careful  to 
ascertain  in  advance  the  buyer's  capacity  to  take  delivery.  This  because, 
under  these  terms  and  as  a  condition  of  making  the  freight  rate,  trans- 
portation companies  may  require  a  certain  rate  of  discliarge  per  day,  and 
that  rate  of  discharge  might  be  in  excess  of  the  buyer's  capacity  to  take 
delivery.  In  such  event  an  adjustment  with  the  transportation  company 
would  be  necessary,  which  miglit  affect  the  freight  rate  and  consequently 
the  price  to  be  quoted. 

...  In  almost  all  cases  it  should  be  possil)le,  when  making  shipments 
by  steamer,  to  obtain  insurance  cover  giving  full  protection  from  primary 
shipping  point  to  designated  sea  port  delivery,  and/or  foreign  port  delivery. 
As  ordinary  marine  insurance  under  F.  P.  A.  conditions,  i.e.  free  of  par- 
ticular average,  gives  no  protection  against  deterioration  and/or  damage 
to  the  merchandise  itself  while  in  transit,  when  caused  by  the  recognized 
hazards  attending  sucli  risks,  shi])pers  should  endeavor  in  all  cases  to 
obtain  insurance  under  W.  P.  A.  (S.  P.  A.)  condition,  i.  e.  with  particular 
average  (subject  to  particular  average),  when  in  excess  of  the  customary 
franchise  of  3%  to  5%.  Under  such  form  of  insurance,  underwriters  will 
be  called  upon  to  pay  claims  for  damages  wlien  these  exceed  the  stipulated 
franchise. 


PRICE   POLICY  287 

eign  currency  at  the  rate  of  exchange  prevalent  on  the 
date  the  goods  arrive,  protecting  itself  against  a  decline 
m  exchange  rates  in  the  meantime  by  hedging  the  trans- 

,T'.  ^^'^"^'^  l^'""  ^''■^'^'''^^  ^'^  actually  in  the  possession 
ot  the  foreign  dealer  he  should  assume  the  risk,  since  he 
IS  in  position  to  estabhsh  his  selling  price  and  dispose 
ot  his  merchandise  at  his  own  discretion.  This  plan  has 
been  objected  to  on  the  grounds  that  if  a  customer  has 
ninety  days  in  which  to  pay  for  the  goods  after  their  ar- 
rival, he  might  still  be  unable  to  meet  his  draft  at  ma- 
turity it  the  exchange  rates  should  continue  to  fall  after 
his  merchandise  had  been  received. 

By  quoting  prices  to  a  customer  in  his  own  currencv 
the  company  would  make  it  easy  for  him  to  compare 
puces  with  other  foreign  houses.     In  spite  of  the  decimal 
systein  of  all  but  the    English    cuiTciich's,    the    f«>reio-n 
merchant  frequently  has  difficulty  in  c..ll^■el•tino■  a  dollar 
quotation  into   terms    of    his    „wn    monetarv    svstem- 
whereas  it  would  be  comparativelv  easv  for  the  com- 
pany to  do  this  work  ])ecause  of  its  famiJiai-ity  with  and 
experience    in    handling   foreign    orders.       As    the    cus 
tomer  must  resell  his  drugs  in  the  native  currencv    this 
niethoii  would  enal)le  him    to    know    exactlv    what    his 
goods  would  cost  and  what  would  be  his  ])robable  protit 
on  their  resale.     Thus  the  element  of  risk  from  Huctuat- 
iiig  exchange  rates  would  be  removed  as  far  as  he  was 
concern(.d.     At  the  present  time  the  companv's  strong- 
est competitor   in    Latin   America    is   (pioting   prices   fn 
loreign  currency. 

tvn'.;'.!^"'"'""^'  "^  l''^^^*'^-  '"iKsular  iuvoic-cs  ;uul  .similar  items  are  irbi- 

'.       o'c^l  F^or^-''  T"?^^"   f-'—'t.   tl.e.y  are  not   included   in'"^; 

bZr  to   nieet  them.'-   '^   '^  •"•"^='^---  -^  ^^  is  part  of  the  dutv  of  the 

American  Foreign  Trade  Definiti.ms  adopted  at  a  eonferenee  partic-iiv.te.l 
in  l)y  committees  representino-  tlio  I'mm    F)ain(  ipated 

National  Foreign  Trade  roinioil 
Chamber  of  Commerce  of  U.  S     \ 
National  Association  of  Manufacturers 
American  Manufacturers  Export  Assonation 
I  liiladelphia  Commercial  :\ruseum 
American  Kx,.orters  and    importers  Association 
n.auiber  of  Commerce  of  the  State  of  New  York 
-\e\v  ^ork  Produce  Exchano-e 
New  York  .Aferchants  AssoHation 
December  Kith,   ]fH9. 


288    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

If  prices  are  quoted  in  foreign  currencies,  however, 
the  company  must  assume  the  risk  of  fluctuating  ex- 
change rates.*  Altliough  this  risk  can  be  absorbed  by 
quoting  high  enough  prices  to  cover  any  probable  varia- 
tions, high  prices  usually  discourage  dealers  in  placing 
orders.  In  most  countries  it  is  possible  for  the  com- 
pany to  protect  its  interests  by  selling  futures  to  cover 
the  amount  of  its  orders  as  of  the  date  settlement  is  to 
be  expected.  If  the  hedging  transaction  is  made  after  the 
order  has  been  transmitted  through  the  mills  and  re- 
ceived by  the  home  office,  the  company  may  suffer  a 
loss  from  the  marked  fluctuations  in  exchange  which  may 
occur  during  the  period  the  order  is  in  transmission, 
(^apable  foreign  agents  in  important  commercial  cities 
may  hedge  the  order  at  the  time  it  is  taken,  but  this 
transaction  cannot  be  readily  performed  by  salesmen  in 
the  inland  towns  in  Latin  America, norcanitbe  performed 
profitably  by  an  agent  on  small  orders.  Furthermore, 
if  the  order  is  cancelled  or  not  accepted  by  the  company 
for  any  reason  the  firm  may  stand  a  loss.  It  has  been 
suggested  that  the  company  should  attempt  to  hedge  its 
orders  in  advance,  anticipating  from  i)ast  records  the 
number  of  sales  in  each  country,  but  it  would  be  difficult 
to  determine  either  the  number  of  ordei's  or  the  exact 
time  when  they  would  be  secured. 

A  foreign  merchant  frequently  wishes  to  know  what 
the  merchandise  will  cost  him  in  his  own  currency  de- 
livered at  his  store  and  not  what  the  goods  are  worth 
in  the  United  States  in  American  currency.  He  does 
not  ^visll  to  be  bothered  with  figuring  freight  and  in- 
surance. But  when  a  c.  i.  f .  quotation  is  made  the  sales- 
man cannot  be  sure  what  the  freight  rates  will  be.  Since 
steamship  companies  often  grant  lower  rates  when  the 
cargo  is  on  the  dock  ready  to  go  into  the  hold  than  when 
they  are  asked  for  rates  two  months  in  advance,  in  order 
to  safeguard  itself  the  conqiait>'  must  figure  an  ample  al- 
lowance- for  freight  charges  based  on  measurements  or 

*In  Cliilc,  where  there  is  both  the  paper  and  gold  peso  in  circuh'ition, 
tliis  difficulty  can  be  overcome  by  (piotiiig  all  prices  in  gold;  but  this 
method  is  not  feasible   in   many   countries  which   are   iu)t   on  a  gold   basis. 


PEICE  POLICY  289 

weight,  wliichevei-  is  higher.    If  tlie  quotation  is  i„  for 
eign  currency  an  allowance  mnst  also  be  made  to  cover 

he  exchange  nslc  or  the  premium  charge  on  the  hecl°in^ 
transaction.-    Thns  in  allowing  for  the°se  risk    tl  e  Carf 
ton  Company  nnght  quote  an  order  c.  i.  f.  Rio  de  .Janeiro 
a;t  811  milreis.    A  quotation  of  $100,  f.  o.  b.  seaboard 
on  the  same  goods  might  be  received  from  a  compemo  ' 
If  the  merchant  should  figure  the  freio^ht  nnrl  ;„„ 
charges  at  $8.23  and  the  nUe  of  excSg    ifj  hewS 
find  the  cost  to  him  of  the  f.  o.  b.  quotation  won  d  be 
i5j7o  milreis.     Comparing  this   amount  with  the  811 
mlreis  of  the  c.  i.  f.  quotation  he  would  disco    ft  the 

that   the   company   was   attempting   to  make   excess  ve 
profits  or  had  but  little  faith  in  Brazilian  mone      fi 
allowed  so  wide  a  margin.    In  all  probabiIit^•  he  would 
give  h,s  order  to  the  firm  quoting  the  lowest  pric    re"  ard 
less  0     he  form  n,  which  the  quotation  was  made   ■^''" 
it  net  prices  are  quoted  the  companv  has  found  its 
cata  ogs  are  but  short-lived  as  shown  bv  the  tVt  tha 
llutr^ued    catalogs    costing   $1,730    were    scra,^  d    fn 

fte  Caf.|'o    p"'"-*-    ^■'  I""""*-  '^  l'«t  Pri«''.  therefore 
dea  of  T'     TT-   J™"'''  Sive  its  customed  a  gxmeS 
Ice  mn   t  f"      °^  '"""^  ^'""'^  '^"'''"  "'  «'«  catalog,  and 
ino  di  ;    •  /!,'?"  '""•'•'""'t'*  are  accustomed  to  leceiv 
jng^disoouuts,  tins  method    would   probably    appeal    t' 

A  net  price,  however,  is  more  flexible  than  n  lisf  ,„•;  „ 
-nce..t  .  possible  to  show  small  vr^^^not^]^:^ 

chased  through  tlio  bank  fo?deu!ery  on  tto'Tr'    ^'""'''^^    "^^^^^    ^e   pur- 
When  the  ]00,000  pesos  ^^evoTec^vea  uL^^^^^^^  '''''  ^^  ^^  "^^de. 

bank  which  would  deliver  Anieric  m  doll.r?       I    '^  ^'^  *"'^^  «^«^  *»  the 
per  month  for  the  time  co  Jm         ,.  ''  '"^'''"^  ''  ^^^-"^^^e  "^  V^  of  1% 

the  hed.e   eonld  be   ^xt^nded'^or  "/L'^samTrrtl!"""  ^^'""^'  ^e  Squire!: 


290    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

are  difficult  to  indicate  by  a  complicated  string  of  dis- 
counts.* The  use  of  a  net  price  promotes  simplicity 
and  accuracy,  since  it  is  difficult  for  many  merchants  to 
figure  a  long  list  of  discounts.  This  difficulty  is  increased 
if  c.  i.  f.  quotations  are  made,  since  separate  lists  must 
be  made  out  for  each  port  or  else  a  complicated  freight 
and  insurance  schedule  must  accompany  the  discount 
list.  Tn  the  latter  case  the  quotation  is  really  f.  o.  b. 
seaboard,  since  the  customer  is  left  to  figure  his  own 
c.  i.  f.  quotation.  If  c.  i.  f.  list  prices  are  used  a  com- 
plicated sliding  scale  of  discounts  must  be  worked  out  in 
order  to  offset  the  inclusion  of  insurance  and  freight  in 
the  list  price. 


Problem  69 
Southwest   Cooperage   Company — Quotation   of   Prices 

(During  1918,  a  large  New  York  bank  was  active  in 
financing  and  supervising  the  shipment  of  wine  shooks 
to  the  Argentine.  Not  only  did  the  bank  handle  the 
drafts  on  shipments  of  these  wine  cases  but  through  its 
commeicial  service  department  and  its  branch  in  Buenos 
Aires  it  looked  after  the  shipping  documents  and  trans- 
mitted offers  and  acceptance  of  bids.  On  August  8, 
1918,  the  Buenos  Aires  branch  of  the  bank  cabled  to 
New  York  asking  offers  on  five  to  ten  thousand  wine 
hliooks  of  53-55  gallons  ca])acity,  for  its  customer  Mendez 
and  Tilscobar. 

The  New  York  bank  sought  offers  from  different 
American  manufacturers  and  received  a  quotation  from 
the  Southwest  Cooperage  Company  of  Paducah,  Ken- 
tucky, in  accordance  with  wliicli  the  bank  sent  the  fol- 
lowing cable  to  its  branch : 

*The  aceuraey  with  which  minor  price  variations  can  bo  shown  is  one 
of  the  reasons  given  by  tlie  steel  companies  in  support  of  their  practice 
of  quoting  net  prices. 


PRICE   POLICY  291 

"MENDEZ  iVND  ESCOBAK  SOUTHWEST  COOP- 
ERAGE OFFERS  TEN  TO  FIFTEEN  THOUSAND 
SHOOKS  FIFTY-THREE  FIFTY-FIYE  GALLONS 
FOUR  DOLLARS  THIRTY-FIVE  CENTS  FOB  MO- 
BILE OR  NEW  ORLEANS  AUGUST  SEPTEMBER 
DELIVERY  SUBJECT  EXPORT  LICENSE." 

In  acceptance  the  South  American  branch  cabled  the 
follomng  terms: 

"REFERRING  TO  Y'OUR  TELEGRAM  SOUTH- 
WEST COOPERAGE  MENDEZ  AND  ESCOBAR 
ACCEPT  FIFTEEN  TPIOUSAND  WINE  SHOOKS 
FIFTY'-THREE  FIFTY"-FIVE  GALLONS  AT 
FOUR  DOLLARS  THIRTY-FIVE  CENTS  FOB  IM- 
MEDIATE SHIPMENT  FREIGHT  NOT  TO  EX- 
CEED THIRTY  DOLLARS  INSIST  UPON  GOOD 
QUALITY^  OF  WOOD  AND  IF  NECESSARY  AP- 
POINT EXPERT  OPEN  CREDIT  ACCORDINGLY^ 
WE  INSURE  HERE." 

In  accordance  mth  this  acceptance  the  Southwest  Coop- 
erage Compan}^  entered  an  order  for  15,000  shooks 
for  August  shipment.  The  order  was  made  contingent 
upon  tlieir  being  able  to  obtain  an  export  license  for 
Mendez  and  Escobar.  The  New  York  bank  wrote  and 
asked  them  wiiether  the  quotation  f.  o.  b.  which  Avas 
made,  meant  f.  o.  b.  boat  or  f.  o.  b.  cars  New  Orleans,  to 
which  the  company  answered  that  the  price  "of  $4.35 
each  is  f.  o.  b.  cars  New  Orleans  or  Mobile.^' 

CA-t  ^he  time  the  order  was  placed  considerable  difficulty 
was  experienced  in  making  shipments  to  South  America. 
In  the  first  place,  an  export  license  had  to  be  secured  in 
favor  of  the  consignees ;  in  the  next  place,  internal  trans- 
portation was  over-taxed  by  war  demands;  finally,  the 
Government  had  commandeered  the  greater  part  of  the 
ocean  r^hipping  facilities  for  war  purposes  so  that  it  was 
a  difficult  matter  to  secure  ocean  space  for  South  Amer- 
ican ports.^ 

The  New  York  bank  turned  over  the  forwarding  of 
the  order  at  the  southern  ports  to  a  responsible  for- 
warding firm,  while  the  Southwest  Cooperage  Company 
cooperated  witli  this  concern  in  trying  to  secure  ocean 


292    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

passage  for  the  shipment  of  the  15,000  wine  shocks. 
Great  di^culty  was  encountered  in  securing  shipping 
space.  In  September  the  Southwest  Cooperage  Com- 
pany refused  longer  to  hold  the  shooks  at  its  factory 
because  of  the  expense  of  holding  them  there  and  of 
the  inconvenience  caused  by  the  crowding  of  their  ware- 
houses.'  Accordingly  the  bank  authorized  the  company 
to  make  shipment,  though  ocean  ]}assage  was  not  yet 
secured.  It  was  found  that  shipment  could  probably 
be  effected  through  Mobile  better  than  through  New 
Orleans ;  hence,  the  shooks  Avere  sent  to  the  former  port. 
(\Vhen  the  shooks  arrived  at  the  dock  in  .Mobile  no  ship- 
ping space  had  yet  been  secured.  The  forwarding  firm 
was  therefore  authorized  by  the  bank  to  put  the  order 
in  warehouse  and  fully  insure  it  until  freight  space  could 
be  obtained.  Payment  was  made  to  the  Southwest  Coop- 
erage Company  when  the  warehouse  receipts  and  the 
railroad  bill  of  lading  were  delivered.) 

The  requests  from  the  South  American  firm  for  ship- 
ment were  insistent.  Several  times  it  was  thought  that 
passage  was  in  sight  but  each  time  the  Government  com- 
mandeered the  boat  which  was  to  be  used.  (On  Septem- 
ber 19,  upon  inquiry  from  the  South  American  firm,  the 
bank  cabled  to  Buenos  Aires  that  the  shipment  was  on 
its  way  to  Mobile  and  delivery  could  be  expected  within 
two  weeks.\  On  October  14  the  bank  again  cabled  that 
shipment  would  be  within  four  weeks.  On  November  20 
the  statement  was  made  that  the  goods  would  leave  with- 
in ten  days.  On  the  13th  of  December  a  definite  date  of 
December  24  was  set.  Un  fact,  the  shipment  was  not  ef- 
fected until  the  10th  of  January.  This  exchange  of 
cables  amounted  to  some  $300,  (Argentine  paper),  all  of 
which  vras  charged  to  the  account  of  the  consignee. 
Wareliouse  charges  accumulated  at  the  i)ort  of  Mobile 
from  the  time  of  arrival  of  the  shipment  from  Paducah 
until  January  10,  to  the  extent  of  U.  S.  $2,760^  More- 
over, interest  was  charged  to  the  consignee  from  the 
date  of  payment  to  the  Southwest  Cooperage  Company 
until  iho  date  of  payment  by  the  consignee  in  Buenos 
Aires. 


PRJCE    POI.ICV  293 

XOii  April  7,  1919,  the  Xew  York  bank  received  the  fol- 
lowiiiiL;'  cable  from  its  branch  in  Buenos  Aires : — 

"MEXDEZ  AND  ESCOBAR  OBJECT  TO  WARE- 
IK  )1^SE  CHARGES  ON  SHOOKS  IF  YOr  CAN- 
NOT OBTAIN  REPtTND  SOUTHWEST  COOPER- 
AGE THEY  OFFER  SUBMIT  ARBITRATION 
CABLE  IF  SOUTHWEST  COOPERAGE  WILLING 

TO  REIMBURSE '7 

This  information  was  sent  to  the  Southwest  C^ooper- 
ag-e  Company,  who  replied  that  ''since  the  shocks  w^ere 
sold  f .•  o.  b.  New  Orleans  or  Mobile,  and  were  delivered 
to  the  latter  port,  we  cannot  see  on  what  grounds  the 
buyers  refuse  to  assume  the  storage  and  cartage  charges. 
Since  the  sliooks  were  sold  f.  o.  b.  Mobile  the  matter  of 
ocean  freight  was  out  of  our  control  and  was  not  a  con- 
dition in  the  sale."  (The  bank  cabled  its  branch  that  "the 
sliooks  were  sold  f.  o.  b.  New  Orleans  and  w^re  delivered 
to  Mobile  at  no  advance  in  freight  charges  and  that  the 
firm  did  not  see  on  what  grounds  the  buyers  could  refuse 
to^ssume  storage  and  cartage  charges.'/ 

rriie  firm  of  ]\[endez  and  Escobar  had  meanwhile  de- 
cided to  submit  the  dispute  to  the  American  C^hamber  of 
Commerce  in  Buenos  Aires,)  which  has  acted  in  many 
cases  as  arbitrator  in  such  matters.  The  following  ex- 
tracts are  taken  from  the  letter  which  they  submitted  to 
the  American  Cham1)er  of  Commerce : — 

"In  tlie  cliMraetci-  of  Ijrokers  for  ^larino  &:  CouipMiiy  and  Goii- 
zali'z  HciMiianos,  we  be?'  to  place  before  you  the  following  shook 
business  upon  Avhich  difference  of  opinion  has  arisen  with  re- 
li'ard  to  the  payment  of  two  items,; — one  of  U.  S.  $1,600,  Avhieh 
the. National  Bank  of  New  York  charges  us  for  inter- 
est on  an  amount,  paid  before  the  proper  time,  and.  another  of 
T\  S.  ;f"2,760  for  warehouse  charges  on  shooks  while  in  deposit  in 
JMobile.     The  facts  of  the  case  are  as  follows : — 

"On  the  24th  of  July,  1918.  the  National  Bank  of 

Xew  Voi'k  through  its  branch  made  us  the  following  otf er : 

"In  reply  to  your  request  for  prices  of  shooks  we  have  re- 
ct'ived  Ihe  following  cable  from  our  head  office: 

"MENDEZ  AND  ESCOBAR  SOUTHWEST  COOP- 
ERAGE COMPANY  OFFERS  TEN  TO  FIFTEEN 
THOUSAND     SHOCKS     FIFTY-THREE     FIFTY- 


294    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

FIVE  GALLONS  FOUR  DOLLARS  THIRTY-FIVE 
CENTS  FOB  MOBILE  OR  NEW  ORLEANS  AU- 
GUST SEPTEMBER  DELIVERY  SUBJECT  EX- 
PORT LICENSES" 

"On  the  8th  of  Aiiyust  of  the  same  year  we  accepted  the  offer 
of  these  shooks.  to  be  shipped  immediately. 

"The  letter  of  credit  opened  by  the  ■ National  Bank 

of  New  York,  the  original  of  which  is  in  our  possession,  states 
the  following  :— 

'This  ci-edit  will  be  utilized  by  sight  drafts  against  deli\ery 
of  shipping  documents,  invoices,  complete  sets  of  bills  of  lading 
of  order,  insurance  policy,  including  war  risk  and  certificate  of 
origin  corresponding  to  tlie  following  merchandise: — 15,000  wine 
shooks  to  be  shipped  by  steamei-,  Buenos  Aires.'  This  agree- 
ment in  accordance  with  that  al)ove  written,  has  had  as  a  basis: 

1,  Shipments  in  August  and  September, 

2.  Payment  against  complete  sets  of  the  shipping  documents. 

The  shooks  instead  of  having  been  shipped  on  the  dates  in- 
dicated, were  shipped  oidy  on  .January  21,  1919,  the  buyers  hav- 
ing sutfered  during  all  this  time. 

"The  coiuiitions  of  the  offer  are  distinct  and  consist  in  the 
sale  f.  o.  1)..  which  accordiiig  to  all  commercial  practices  signify 
put  on  board;  and  the  conditions  of  the  credit  are  also  definite 
and  clear  and  establish  that  the  payment  of  the  merchandise 
would  only  be  elfective  against  delive}-y  of  shipping  documents. 
In  consequence,  the  amount  of  T.  S.  $1,600  for  interest  on  the 
sum  of  $66,250.  for  115  days,  should  be  reduced  to  73  days. 
This  is  1".  S.  $790.  In  view  of  the  fact  that  payment  Avas 
eft'ected  on  the  15th  day  of  November.  191S,  the  interest  should 
only  be  computed  from  the  17th  of  January,  1919,  the  date  on 
which  payment  was  made  for  freight  and  when  the  merchandise 
was  shipped,  and,  consequently,  the  date  on  which  the  bills  of 
lading  should  have  been  delivered. 

"With  reference  to  the  sum  of  U.  S.  $2,760,  which  the  bank  in- 
tends to  collect  for  warehouse  charges  in  New  Orleans,  we  con- 
sider this  a  completely  arbitrary  demand,  for  the  reasons  we 
have  expressed,  which  are  based  on  the  conditions  f.  o.  b.,  under 
which  the  shooks  were  bought,  and  which  they  alone  clearly 
determine  and  deliveiy  was  to  bo  made  on  board  and  free  of  all 
exjieiise,  especially  that  of  the  warehouse." 

\  On  May  23  the  branch  bank  cabled  New  York : 

"MENDEZ  AND  ESCOBAR  SHOOKS  MATTER 
UNDER  ARBITRATION  AMERICAN  CHAMBER 
OF  COMMERCE  APPARENTLY  FAVOR  BUY- 
ERS CLAIM  REGARDING  INTEREST  AS  THEY 


PRICE  POLICY  295 

DID    XOT    AUTHORIZE    PAYMENT    AGAINST 

WAREHOUSE     RECEIPTS     CREDIT     BEING 

OPENED     AGAINST     SHIPPING     DOCUMENTS 

CABLE  URGENT  COULD  YOU  OBTAIN  REFUND 

SOT'THWEST  COOPERAGE ") 

/ 

(Tlio  bank  replied  with  a  sharp  cable,  asking  ''what 

claims  are  being  arbitrated  and  the  grounds  for  the 
same,  and  by  whom  the  arbitration  was  authorized  on 
SouthA\est  Cooperage  behalf.  The  Southwest  Cooper- 
age insists  that  there  was  no  possible  claim  against  them 
since  the  goods  w^re  delivered  f.  o.  b.  Mobile,  which  in 
this  country  means  f.  o.  b.  cars;  goods  therefore  at  pur- 
chaser's risk  after  arrival  New  Orleans;  credit  not 
opened  against  ocean  documents  but  against  railroad  bill 
of  lading  or  warehouse  receipts." 

When  the  branch  bank  showed  this  to  its  customers  in 
Buenos  Aires  they  agreed  to  withdraw  their  petition  be- 
fore the  American  Chamber  of  Commerce  provided  the 
bank  used  its  good  offices  in  trying  to  put  through  their 
claim  with  the  American  firm.  They  wrote  the  head 
office  to  this  effect. 

What  action  should  have  been  taken  by  the  Southwest 
Cooperage  Company  upon  this  claim  of  Mendez  and  Esco- 
bar? AVhat  measures  should  have  been  taken  to  have 
avoided  any  such  misunderstanding?) 


Problem  70 

Morrison  Manufacturing  Company — Uniformity  of  Selling 

Price 

A  question  regarding  establishment  of  a  uniform  price 
policy  in  its  export  business  has  now  been  placed  before 
the  directors  of  the  Morrison  Manufacturing  Company. 
This  corporation,  organized  in  1897  for  the  manufacture 
of  hammers,  hatchets,  saws,  and  other  carpenter  tools, 
has  succeeded  in  establishing  national  distribution  sell- 
ing all  its  products  under  its  trade  name.    In  the  United 


2J)()    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

States  the  product  lias  l)eeu  sold  tlirongli  wholesalers 
at  a  ni'lt'orm  price  and  orders  from  retailers  or  consmn- 
ers  have  not  been  accepted.  Previous  to  1914,  the  com- 
pany dumped  occasional  surpluses  in  the  foreign  mar- 
kets, securing  prices  which  were  frequently  below  costs. 
Durin.g  the  AVorld  "War,  when  European  competition  was 
at  least  partially  eliminated,  the  company  sold  goods  in 
the  South  American  market  somewhat  more  regularly 
at  prices  which  yielded  a  substantial  profit.  However, 
it  did  not  develop  this  trade  to  any  great  extent,  because 
of  domestic  and  European  demand  for  these  articles.  At 
the  present  time  (December  1921)  because  of  the  increas- 
ing number  of  competitors  who  are  flooding  the  domestic 
market  with  goods,  the  Morrison  Manufacturing  Com- 
pany must  look  elsewhere  for  customers  if  it  is  to  run 
its  factory  on  an  efficient  basis. 

Air.  Morrison,  president  of  the  I\Iorrison  Manufac- 
tui'ing  (lompany,  recently  conferred  with  Mr.  Carlton, 
assistant  manager  of  a  commission  house  with  sales- 
men in  several  foreign  countries,  regarding  the  price  pol- 
icy that  the  Morrison  Company  should  folloAV  in  order  to 
develop  a  substantial  foreign  trade.  In  this  conference 
I\[r.  (Jarlton  gave  his  opinion  as  follows:  ''Our  sales- 
men fan  sell  your  tools  at  almost  any  reasonable  price  at 
\\liich  }'our  company  will  bill  them.  If  the  price  is  very 
low  it  will  be  possible  for  our  men  to  sell  large  orders 
to  foreign  wholesalers  and  big  consumers.  If  your  price 
is  not  quite  so  favorable,  the  large  wholesalers  will  refuse 
to  touch  the  merchandise  and  it  will  be  necessary  for  the 
salesmen  to  call  on  the  smaller  jobbers.  If  the  ]n-ice  is 
comparatively  high,  however,  the  -salesmen  will  be  able 
to  sell  only  to  retailers  who  will  ])lace  small  orders.  In 
many  foreign  markets  the  liiK'  of  tools  produced  by  the 
Morrison  Manufacturing  <  'ompany  is  not  well  known. 
Many  jobbers  and  wholesalers  refuse  to  place  orders  at 
an\'  ])ric('  until  the  ])rodu('t  is  introduced.  Thei'efore,  in 
order  to  establish  your  line  in  those  districts,  it  is  nec- 
essary that  our  salesmen  sell  first  to  small  retailers  before 
ii'oing  to  the  wholesaler  or  jol)l)('i-  and  asking  him  to  stock 


PRICE  POLICY  a97 

the  goods.    This  i.s  fh.  only  «-ay  that  y„u  can  hnnlv  cstah- 
lish  customers  m  a  foreign  country.    Ot  course,  (lie  cost  of 
selling  to  retailers  is  higher  than  that  of  selhng  to  jobbers 
Obviously  It  costs  more  to  call  upon  many  sinall'ioblie.^ 
than  It  does  upon  a  few  large  wliolesalers  and  conimis^ 
ever  IZ^''  Tf  '''^^°"li"§ly.    In  the  long  run,  how- 
beiiefi?  hv     ?  ?•"'  ^•""'\««"^P«"y  ^"1'  gain  the  greatest 
m?ne^  t  ",•   t?*'"^  ^  ^"^'^^  '"'""'^  ^"»  ««teblish  a  per- 
manent clientele,  even  though  the  preliminary  cost  ma^- 
reduce  the  amount  of  profit  received 
"If  you  are  to  take  this  step  it  would  be  advisable  for 

tZwLt^i ',;r  ''Tv'"""  ^"'"^  '°^^'^^  p"- 1-''^  fo 

he  o-ood  will     t  1,"    7  "'"  "*"""■'  "'  °«^"'  *°  ™«"'*«i" 
the  good  will  ot  the  former.    Another  point  which  von 

must  remember  is  that  the  relation  of  the  foreign  marke 

hnndl:  oT'""-'  """i^''  "^'■'™P'<^'  ^-  ""S'^t  «^'"  -    - 

tion  to  ret^iwr''  f  f  "'^''■  "'  ^^'^''''  <^'">-'  l""'  di«tribu- 
non  to  letailers  and  imal  consumers  within  his  countrv 

Therefore,  we  could  sell  him  merchandise  at  the  Z".  i^ 

shipped  to  ]!.ngland   are   frequently  transshipped   to   a 
holesaler  m  India  or  other  countries.    It  is  dear  tha 
Eno  and'a^  ur    "  '"^^e  to  Roberts,  a  transshippe    h 

t  Unot  be'i  1  trf'  '"  ^^''''''"'  wholesaler,  the  former 

«m  not  oe  able  to  show  a  reasonable  profit  in  sellino-  to 

holesalers     Therefore,  it  is  necessary  to  lave  d  ffefent 

prices  in  order  to  enter  different  markets."  ' 

f-n^';f  «""""  "f""  ^""^  "P  *"  ^"''Stio"  with  tlie  secre 
tai     of  the  e.^port  association  which  had  handled  a  part 

iia<<iU]n  -p^.,  1         4LiinLa  it  ^vould   sometimes   be 

possible  ior  a  mercliaiit  in    one    eonnfrv    f^ 

^Mppeddi,'ectf,t';,!^^-.^'^t^;-tS:^:-:^ 


298    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

It  was  further  contended  that,  unless  the  company  estab- 
lished a  uniform  selling  price,  it  would  be  unable  to 
determine  in  advance  the  proportion  of  profits  which  it 
should  receive  from  its  export  trade.  In  support  of  this 
he  cited  numerous  cases  of  companies  which  had  failed 
because  they  had  not  taken  into  consideration  the  loss 
from  the  low  prices  at  which  they  had  sold  in  some 
countries. 

Should  the  Morrison  Manufacturing  Company  estab- 
lish a  uniform  price  for  all  foreign  markets  ? 


Problem  71 

Cotton  Braid  Associates — Price  Variation  to  Cover  Credit 

Terms 

In  selling  braids,  tapes,  dress  trimmings,  and  similar 
products  in  (.-uba,  Argentina,  and  other  agricultural 
countries  where  seasonal  fluctuations  have  an  important 
bearing,  the  Cotton  Braid  Associates  have  frequently 
found  it  necessary  to  grant  longer  credit  terms  than  in  a 
highly  industrial  country  such  as  England.  In  Argen- 
tina, where  concessions  in  terms  in  the  retail  business 
appear  to  be  absolutely  necessary  at  certain  times  of  the 
year,  this  company  has  not  infrequently  allowed  cus- 
tomers five  months  in  which  tjo  pay  their  bills.  The 
expense  of  carrying  these  extended  terms  is  no  small 
item,  yet  because  of  customers'  objections  to  paying  inter- 
est the  company  has  not  deemed  it  expedient  to  make  a 
direct  charge  for  tliis  service.  Since  more  importance 
is  frequently  attached  to  terms  than  to  price,  the  com- 
pany has  taken  care  of  this  burden  by  attempting  to 
adjust  prices  according  to  the  length  of  credit  terms 
granted. 

The  principal  difficulty  in  carrying  out  this  policy  is 
that  customers  sometimes  ask  for  ]3rice  quotations  based 
on  cash  payment  and    then    demand    long-time    terms. 


PRICE   POLICY  '      299 

Refusal  to  grant  these  requests  may  result  in  the  loss  of 
the  customer's  trade.  A  :\rexican  importer  asked  for  the 
lowest  price  which  the  company  would  grant  allowing  for 
all  possible  discounts.  After  receiving  this  quotation, 
he  outlined  an  attractively  large  order  for  braids,  ribbon, 
tapes,  and  other  dressmaking  findings  but  refused  to 
place  it  with  the  Cotton  Braid  Associates  unless  he  was 
given  sixty  days'  dating.  Although  the  compan>-  might 
have  made  a  nominal  i)rofit  on  the  transaction,  the  inter- 
est charge  for  sixty  days  on  such  an  order  would  have 
reduced  the  i^rofit  materially;  consequently  it  refused  to 
grant  the  .Mexican  importer's  request.  As  a  result  it 
failed  to  secure  any  of  his  business. 

One  way  in  which  the  company  might  avoid  this  trouble 
in  the  future  is  to  prejjare  lists  of  customers  according  to 
their  credit  rating — those  who  can  be  given  sixty  to  ninety 
days'  terms,  those  who  must  pay  cash  upon  the' arrival  of 
the  goods,  and  those  who  must  })ay  a  deposit  in  advance. 
It  appears  to  be  the  usual  practice  for  the  company's 
foreign  customers  to  take  all  tlie  time  they  can  in  paying 
their  bills,  so  that  in  quoting  a  price  to  any  customer  the 
salesman  sliould  base  his  quotation  on  the  maximum 
credit  terms  allowed.  This  policy  might  work  with  old, 
established  customers  whose  rating  is  definitely  known,' 
but  frequently  the  salesman  calls  on  dealers  about  whom 
the  company  has  had  little  or  no  credit  information. 
]\rany  salesmen  say  that  the  only  way  in  which  this 
matter  can  be  handled  is  through  experience.  Through 
spending  a  number  of  years  in  the  foreign  field,  a  sales- 
man should  learn  to  size  up  a  customer's  financial  con- 
dition and  judge  the  probable  length  of  credit  terms  for 
which  he  will  ask  and  which  the  comjjany  can  grant. 
Others  propose  that  the  salesmen  should  be  instructed 
to  quote  terms  and  prices  together  and  that  customers 
must  accept  both  the  terms  and  the  prices  quoted  or  none. 
If  the  credit  department  should  refuse  to  approve  of  the 
terms  quoted  and  require  cash  in  advance,  the  price  would 
be  reduced.  But  since  terms  are  the  important  thing  in  an 
agricultural  country,  it  is  doubtful  if  a  slight  reduction 
in  price  would  assuage  the  customer's  ill-will  caused  by 
the  refusal  to  accept  the  terms  quoted. 


300    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  72 

McDermott  Company — Fixed  Prices  versus  Price  Variation  by 

Salesmen 

In  selling  braids,  I'ibbous,  lacings,  trimmings,  and 
dressmakers'  findings  in  Latin  America,  the  McDermott 
Company  sets  a  minimum  ]irice  l)'j]()w  which  its  salesmen 
cannot  go  in  making  price  concessions,  but  any  amount 
that  can  be  secured  above  the  miuimnm  price  is  split  half 
and  half  between  the  salesman  and  the  company.  In 
addition  to  this  price  bonus,  the  salesman  is  paid  of 
course  a  salary  and  all  his  expenses.  This  policy  Avas 
adopted  because  the  competition  of  foreign  houses  fre- 
quently made  it  necessary  for  the  salesman  to  cable  for 
special  price  reductions.  At  the  time  this  plan  was  |)ut 
into  effect  the  salesforce  was  small  and  was  composed  of 
experienced  men,  but  now  the  force  has  doubled  in  size 
and  a  numbei'  of  new  men  have  l)een  added. 

By  setting  a  minimum  price  l)elow  which  no  oixler  can 
be  taken  the  company  avoids  much  useless  cabling; 
decision  as  to  the  need  of  a  price  concession  is  left  to  the 
men  on  the  ground  who  are  conversant  with  the  facts; 
by  ottering  to  split  all  overages  with  them,  the  company 
assures  itself  that  its  salesmen  will  not  cut  prices  unnec- 
essarih\  In  many  Latin  American  countries  it  appears 
to  be  a  custom  in  the  trade  to  give  price  Y^ariations  on  the 
basis  of  friendship  or  for  other  reasons  in  order  to  secure 
the  business.  Frequently  the  people  of  these  countries 
are  not  familiar  with  the  one-price  policy  and  ai"e  accus- 
tomed to  bargain  over  the  terms.  Com])etition  in  the  line 
of  goods  produced  by  the  McDermott  Company  is  Y^M-y 
keen.  By  reducing  prices  to  meet  the  demands  of  cus- 
tomers the  company  is  ahnost  sure  to  secure  the  inti'oduc- 
tion  of  its  lirie,  assures  itself  of  getting  the  maximum 
price  possible,  and  at  the  same  time  sets  a  minimum 
price  to  insure  a  reasonal)le  })i-olit  ])elow  which  a  sales- 
man cannot  go. 

Having  operated  this  jilan  for  two  years  the  company 
has  discovered  that  its  sales  are  not  so  large  in  some  dis- 


PRICE  POLICY  301 

tricts  as  had  been  hoped.  Some  salesmen  appear  to 
work  successfully  when  they  are  allowed  to  vary  the 
price,  but  occasionally  others  apparently  forget  compe- 
tition entirely  so  interested  are  they  in  securing  an  over- 
price which  they  can  split  with  the  company.  Still  other 
salesmen  are  so  keen  to  make  a  good  showing  that  they 
ignore  the  possibility  of  securing  a  price  above  the 
minimum  set  by  the  company,  \\dth  the  result  that  the 
minimum  price  becomes  the  standard  price  for  all  their 
orders.  Sometimes  a  customer  learns  that  his  competi- 
tor has  received  a  lower  price  than  he  and  the  good-wil] 
of  the  company  is  injured,  the  customer  frequently  refus- 
ing to  place  further  orders  A\T.th  the  McDermott  Company 
unless  a  rebate  is  made  on  past  purchases.  Because  of 
these  difficulties  the  McDermott  (company  realizes  keeidy 
the  unsatisfactory  points  in  its  present  system,  but  it  is 
perplexed  as  to  a  policy  which  could  l^e  pursued  witliout 
raising  still  greater  difiiculties. 


Problem  73 
Calkins  Talcum  Powder  Company — Cash  Discounts 

.Many  Latin  American  customers  of  the  Calkins  Talcum 
Powder  Company  not  only  have  failed  to  pay  their  bills 
promptly,  but  also  have  asked  for  extensions  beyond  the 
60-day  limit  of  the  terms  agreed  upon.  In  the  domestic 
market  the  company  has  found  that  in  selling  cold  cream, 
talcum  ])owder,  and  other  toilet  preparations  the  same 
terms  of  2% — 10  days,  60  days  net  have  been  ample  to 
encourage  prompt  payment  by  most  retail  customers.  It 
apiDcars  that  this  delay  in  the  payments  of  Latin  Ameri- 
can retailers  is  partialh^  due  to  the  high  interest  rates 
charged  by  their  banks.*  Exchange  fluctuations,  poor 
business  conditions,  and  the  seasonal  influences,  which 
dominate  commercial  transactions  in  agricultural  coun- 
tries, have  also  played  their  part.    Because  of  this  situa- 

*Tli('  iionnal  interest  r;ite  in  Peru  was  reported  as  9%  in  1922. 


302    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

tion,  the  company  is  considering  the  expediency  of  grant- 
ing an  increased  cash  disconnt  in  order  to  encourage  the 
prompt  settk'ment  of  Latin-American  accounts. 

Although  by  granting  a  37o  or  4%  cash  discount  the 
company  might  encourage  its  customers  to  borrow  from 
the  banks  to  meet  their  ol)ligations,  even  though  th(^ 
interest  rate  should  be  higher  than  that  in  the  United 
States,  there  is  the  danger  that  a  customer's  ill-will  would 
be  incurred  if  he  were  forced  to  lose  so  large  a  discount 
because  he  was  a  few  days  late  in  paying  his  bill.  Fur- 
thermore, in  an  agricultural  country  where  seasonal  influ- 
ences are  great  and  extended  terms  are  sometimes  con- 
sidered more  important  than  low  prices,  it  cannot  be 
expected  that  customers  will  always  be  able  to  make  im- 
mediate payments  even  though  a  larger  discount  is  given. 

It  is  proposed,  therefore,  that  the  company  should  cul- 
tivate the  good-will  of  its  foreign  customers  by  granting 
any  reasonable  time  that  they  may  require  to  pay  their 
bills,  but  arranging  the  discount  rate  accordingly.  In 
order  to  protect  the  company  it  is  suggested  that  easlom- 
ers  should  be  encouraged  to  supply  letters  of  credit.  If 
customers  suppl}^  credits  against  which  the  company  can 
draw  at  sight,  a  maximum  cash  discount  of  4%  wi;uld  l)e 
allowed ;  if  they  supply  credits  against  which  the  company 
can  di'aw  at  30  days,  a  cash  disconnt  of  ?//<  would  be 
allowed  ;  if  at  6i)  days,  2*%  would  be  allowed  ;  if  at  DO  days, 
1%  would  be  allowed;  if  at  fonr  nioiiihs,  llu>  company 
Avould  draw  on  them  tor  the  net  amount  of  the  invoice. 
Even  extended  credits  beyond  the  four-mouth  i)eriod 
could  be  arranged  at  a  reasonable  i-ate  of  intei-cst,  i^ro- 
viding  the  customer  agreed  that  a  ('ontirmcd  banker's 
letter  of  credit  would  be  supplied. 

This  plan  has  many  advantages  both  for  the  Calkins 
Company  and  for  its  customers.  The  company  would 
gain  through  the  prompt  ])aynient  of  its  bills  or  through 
the  paying  of  interest  by  the  customer  in  case  ])rompt 
payment  was  not  made.  The  customer  would  gaiii 
because  the  removal  of  this  burden  of  risk  would  enable 
the  company  to  quote  lower  prices.  Furtliei*more,  letters 
of  credit   being  limiied  as  to  time,  the  ('om));iii_\'   would 


PRICE  POLICY  303 

have  an  additional  iiicciitivo  to  make  the  shipments  at  the 
times  specified,  in  order  to  avoid  the  necessity  of  arrang- 
ing for  an  extension  or  renewal  of  the  letter  of  credit  in 
ease  it  should  expire.  If  a  customer  is  in  good  credit 
standing  with  his  home  hanker,  he  should  be  able  to 
arrange  for  a  letter  of  credit  at  a  nominal  charge  without 
being  required  to  reimburse  the  bank  until  he  ha>  l)een 
informed  that  actual  payment  against  the  letter  of  credit 
has  been  made.  This  measure  of  elasticity  should 
meet  the  varying  requirements  of  the  foreign  buyer 
according  to  local  business  conditions  and  seasonal  varia- 
tions. 

Tt  is  doubtful,  however,  if  the  majority  of  foreign 
retailers  could  be  induced  to  adopt  this  method,  since 
many  are  not  familiar  with  modern  banking  methods  and 
are  accustomed  to  receiving  credit  from  the  firms  from 
which  they  purchase.  Furthermore,  unless  they  were 
convinced  of  the  integrity  and  good  intention  of  the 
Calkins  Company,  they  would  not  be  willing  to  open  a 
letter  of  credit  when  they  might  not  be  satisfied  that  the 
merchandise  shipped  would  be  in  accordance  with  either 
the  samples  submitted  or  the  specifications  on  which  the 
order  was  placed. 


Problem  74 

Calkins  Talcum  Powder  Company — Quantity  Discounts 

Thirty-five  per  cent  of  the  retaik'is  in  Porto  Rico, 
Cuba,  and  Mexico  are  reported  as  overstocked  in  the 
toilet  preparatioiLs  manufacturetl  by  the  Calkins  Talcum 
Powder  Company.  There  has  ai)parently  l)cen  a  tendency 
on  the  part  of  salesmen  to  encourage  customers  to  place 
large  orders  on  the  ground  that  the  latter  will  secure 
lower  prices  by  taking  advantage  of  tlie  following  list  of 
discounts:  $50  order,  2%;  $100  order,  I]'.  ;  ^InO  order, 
47f  ;  $200  order,  'y^r  ;  $250  order,  (i',  ;  $:]()()  order  and 
<»ver,  1'',.     lacing  disa]:)i)oint('(l   al    the   nnionnl    o1"   stock 


30t    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

still  on  hand  at  the  time  of  the  salesman's  next  visit,  not 
a  few  retailers  have  claimed  that  the  goods  were  slow 
moving  and  have  been  unduly  cautious  in  placing  addi- 
tional orders.  In  other  instances,  l)ecause  of  the  exposure 
of  the  toilet  preparations  to  dirt  and  moisture  during  the 
time  they  were  in  the  dealer's  possession,  the  packages 
presented  such  a  soiled  and  disreputable  appearance  that 
they  cast  discredit  on  the  company's  products.  In  the 
domestic  market,  manufacturers  of  food  products  subject 
to  rapid  deterioration  often  refuse  to  grant  quantity  dis- 
counts because  they  do  not  wish  to  encourage  merchants 
to  purchase  an  oversupply ;  hence  the  company  is  consid- 
ering whether  it  would  not  be  advisable  to  adopt  this  same 
policy  in  Latin  America. 

By  refusing  to  grant  quantity  discounts,  the  company 
would  also  discourage  price  cutting.  In  Mexico  City 
complaints  have  been  made  by  two  small  retailers  that 
a  large  department  store  is  able  to  undersell  them  because 
of  the  larger  quantity  discounts  which  it  secures.  The 
same  situation  has  been  encountered  in  Tampico,  Vera 
Cruz,  Monterey,  and  Havana,  Cuba.  AYlien  salesmen 
have  shown  the  discount  list,  explaining  that  any  retailer 
that  can  secure  7%  discount  by  increasing  his  order,  these 
merchants  have  shrugged  their  shoulders  and  expressed 
the  belief  that  the  department  store  buyer  had  received 
a  special  concession. 

Although  the  difficulties  enumerated  might  be  partially 
eliminated  by  doing  away  with  quantity  discounts,  most 
foreign  buyers,  particularly  those  in  Latin  America, 
apparently  expect  to  receive  a  concession  in  price  on  large 
orders.  A  second  plan,  therefore,  has  been  proposed: 
the  company  should  follow  its  domestic  policy  of  allowing 
the  maximum  discount  of  3%  on  all  orders  over  $50.  It 
has  been  pointed  out  that  Calkins  Company's  real  reason 
for  giving  its  customers  a  quantity  discount  is  to  pass  on 
to  them  the  saving  resulting  from  their  placing  large 
orders.  Inasmuch  as  separate  cases  must  be  packed  for 
orders  over  $50,  the  saving  on  large  shipments  does  not 
increase  appreciably  beyond  the  3%  saving  on  the  $50 
order.    The  quantity  discount  of  7%  now  given  on  a  $300 


PRICE  POLICY  305 

order  i-eprosi'iits,  tlicrefore,  approximately  a  4%  inside 
discount  given  to  the  large  customers.  It  must  be  borne 
ii.  mind,  however,  that  while  in  the  United  States  a  sales- 
man calls  on  his  customers  on  an  average  of  once  every 
two  or  three  weeks,  in  the  Latin  American  field  a  sales- 
man calls  on  his  customers  once  in  two  or  three  months. 
Consequently  it  is  necessary  that  the  Latin  retailer  place 
a  larger  order  than  the  domestic  dealer,  which  he  might 
hesitate  to  do  unless  the  salesman  was  able  to  point  out 
to  him  the  advantage  of  placing  a  large  order,  in  order  to 
save  the  7%  quantit}"  discount. 


Problem  75 
The  Morrow  Safety  Razor  Company — Price  Maintenance 

The  Morrow  Safety  Razor  Company  in  1920  had  diffi- 
culty in  maintaining  retail  prices  for  its  safet}'  razors 
in  foreign  markets  because  of  fluctuations  in  foreign 
exchange. 

It  was  the  policy  of  the  company  to  maintain  a  fixed 
retail  price  in  both  the  domestic  and  foreign  markets — 
one  dollar  in  the  United  States  for  the  Economy  model, 
6  shillings  in  England,  and  four  pesos  in  Argentina.  In 
the  United  States  there  were  legal  difficulties  in  maintain- 
ing prices  but  in  England  and  Argentina  there  were  no 
laws  forbidding  the  practice. 

The  Morrow  Safety  Eazor  Company  had  a  wojld-wide 
distribution  of  its  product.  The  factory  was  located  on 
the  Eastern  seaboard  of  the  United  States.  Normally 
about  50%  of  its  total  trade  was  with  foreign  countries — 
of  the  foreign  trade  about  70%  was  with  Europe,  20% 
with  Latin  America,  and  10%  with  Asia. 

The  following  plan  was  suggested  to  maintain  prices 
in  England  at  an  even  level  for  1921.  An  agreement 
should  be  made  with  a  bank  by  which  the  bank  would  buy 
sterling  from  the  company  for  the  year  at  a  fixed  price. 
It  was  estimated  by  the  officials  of  the  company  that  the 


306    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

1921  sales  to  England  would  amount  to  120,000  £  sterling 
and  tliat  sterling  at  the  rate  of  abont  10,000  pounds  a 
month  would  be  required.  A  bank  was  willing  to  buy 
sterling  at  the  flat  rate  of  $3.90  for  the  year.  The  officials 
of  the  company  were  of  the  opinion  that  sterling  would 
not  go  very  far  above  that  figure,  and,  indeed,  mthout 
professing  to  be  experts  on  the  subject,  they  were  inclined 
to  think  that  sterling  would  command  considerably  less 
than  that  amount. 

The  actual  working  of  the  plan  would  be  as  follows: 
The  company  was  al)le  to  sell  the  Economy  model  razor 
to  retail  at  6  shillings  ^\'itll  exchange  at  $3.90  at  a  profit. 
If,  however,  sterling  fell  to  $3.60,  and  the  above  plan  were 
not  in  effect,  in  order  to  avoid  a  loss  the  company  would 
be  compelled  to  I'aise  the  retail  price. 

Should  the  3,[o]*row  Safety  Razor  Company  have 
adopted  the  above  plan! 


Problem  76 

Saunders  Sewing  Machine  Company — Price  Maintenance 

In  the  United  States  contracts  to  maintain  resale  prices 
are  illegal;  in  Great  Britain,  although  not  illegal,  they 
cannot  be  enforced;  but  in  most  of  the  other  important 
countries  of  the  world  such  contracts  have  full  legal  sig- 
nificance. The  Saunders  Sewing  ^Machine  Company  how- 
ever has  never  availed  itself  of  the  opportunity  of  enter- 
ing into  any  contract  with  foreign  merchants  controlling 
resale  prices,  although  it  exports  its  product  to  practi- 
cally every  civilized  country  of  the  world.  From  time  to 
time  it  has  advised  its  dealers  to  refrain  from  price  cut- 
ting, on  the  ground  that  if  one  merchant  cuts  the  price  on 
Saunders  sewing  machines  it  would  be  necessary  for 
others  to  do  likewise  and  soon  there  would  be  no  profit  for 
any  merchant  who  handled  the  line.  In  spite  of  this 
advice,  word  has  been  received  that  several  merchants 
in  Japan  and  China  have  been  cutting  prices  on  these 


PRICE  POLICY  307 

machines  and  that  the  trade  of  other  dealers  has  been 
seriously  injured  through  refusal  on  the  part  of  the 
customers  to  buy  Saunders  machines  except  at  the  lower 
price.  Under  these  conditions,  the  company  is  weighing 
the  expediency  of  entering  into  contracts  with  all  foreign 
dealers  requiring  them  to  maintain  an  established  resale 
price. 

The  company  sells  to  all  dealers  in  a  given  territory  on 
a  one-price  basis,  steadfastly  refusing  "to  grant  quantity 
discounts  or  other  concessions  which  might  lead  to  price 
cutting  on  the  part  of  large  dealers ;  but  without  a  con- 
tract actually  preventing  this  practice,  the  Saunders  Com- 
pany has  no  way  of  compelling  merchants  to  maintain  the 
resale  price. 

By  insisting  that  foreign  merchants  maintain  a  stand- 
ard resale  price  on  Saunders  machines,  the  company  can 
be  sure  that  its  dealers  are  securing  a  high  enough  percen- 
tage of  mark-up  to  make  it  profitable  for  them  to  carry 
the  line.  The  dealer's  interest  in  the  product  is  held  if 
a  standard  price  is  maintained  which  assures  him  of  a  fair 
mai-gin  of  profit ;  he  cannot,  however,  be  expected  to  push 
an  article  on  which  he  loses  money  because  the  price  has 
been  cut  below  cost  by  his  competitors.  If  present  price- 
cutting  methods  are  allowed  to  continue,  it  is  probable 
that  a  number  of  dealers  will  drop  the  Saunders  line 
entirely.  Even  with  the  dealers'  customers,  a  low  price 
may  repel  rather  than  enlist  purchasers,  for  good-will, 
prestige,  and  the  value  of  the  product  in  the  minds  of  con- 
sumers suffer  when  prices  are  cut. 

Conditions  are  not  the  same  in  each  territory,  and  in 
some  localities  competition  with  low-priced  Gei^an  and 
Austrian  machines  is  so  keen  that  unless  the  merchants 
can  occasionally  shave  the  price,  they  are  unable  to  sell 
as  many  machines  as  they  might  otherwise.  The  policy 
of  one  price  to  all  is  not  so  universally  understood  in  most 
foreign  countries  as  it  is  in  the  United  States  and  for- 
eigners are  frequently  accustomed  to  haggle  over  prices. 
Althougli  the  company  has  advised  its  dealers  to  main- 
tain a  standard  resale  price  for  their  own  protection  and 


308    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

benefit,  to  compel  all  to  maintain  a  single  resale 
price  might  be  detrimental  to  both  the  dealer  and  the  com- 
pany b}^  causing  a  reduction  in  the  volume  of  sales.  Even 
if  a  dealer  did  enter  into  a  contract  with  the  Saunders 
Sewing  Machine  Company  to  maintain  prices,  he  might 
be  tempted  to  violate  this  agreement  and  because  of  the 
bias  and  partiality  of  many  of  the  foreign  courts  the 
Saunders  Sewing  2\Iachine  Company  might  have  difficulty 
in  enforcing  its  claim. 


Problem  77 

The  Camden  Hosiery  Company — Price  Policy 

[AVhen  in  May  1922  the  president  of  the  Camden  Ho- 
siery Company  made  his  annual  trip  to  England,  the  fall 
buying  season  had  just  opened.  In  order  to  get  business 
there  he  found  it  necessary  to  make  a  drastic  cut  in  the 
prevailing  prices  of  the  firm's  hosiery.  Upon  iiis  return 
to  the  United  States  early  in  June,  he  received  a  letter 
from  one  of  his  largest  customers,  Jose  Grataro  of  Bue- 
nos Aires.  The  letter  stated  that,  while  traveling  recently 
in  England,  he  had  heard  of  the  low  price  quoted  on 
quality  B  hosiery.  As  an  old  customer  of  the  Camden 
Company,  he  did  not  feel  that  he  should  be  placed  at  a 
disadvantage  because  he  purchased  directly  from  the  firm 
rather  than  through  England.  He  therefore  asked  to  be 
given  a  rebate  on  the  large  supply  of  quality  B  hosiery 
which  he  had  in  stock  and  for  which  he  had  paid  -tc  more 
per  pair  than  the  newly  established  price] 

The  company  has  never  established  a  uniform  price 
level  for  the  sale  of  its  product  in  foreign  markets.  The 
president  has  firmly  believed  that  any  concern  which  tried 
to  establish  uniform  prices  would  suffer  greatly  from 
price-cutters.  iThe  policy  of  the  company  has  been  to  fix 
at  whatever  price  was  necessary  to  get  business  at  the 
opening  of  the  season  in  any  market.  After  the  season's 
buying  Avas  under  way  and  prices  had  become  established, 


PRICE  POLICY  309 

customers  were  guaranteed  that  prices  would  stand 
througliout  the  .season.  At  the  time  that  this  request 
for  rebate  came  in,  the  Camden  factories  were  operating 
at  only  70%  capacity  and  fixed  charges  were  dipping  into 
profits.  Argentine  buyers  would  soon  be  laying  in  their 
spring  supphes,  since  the  seasons  are  the  opposite  of 
those  north  of  the  Equator.  The  company  feels  it  would 
be  unfortunate  to  lose  the  good- will  of  its  farge  customers, 
though  it  is  unwilling  to  make  the  concession  asked  for 
unless  it  appears  to  be  good  business. ) 


CHAPTER  VII 


SALES  METHODS 


T 


HE    efforts    of   the    etfective    export    or<;-anizatioii 
sliould  be  directed  toward 


(a)  Finding  the  prospective  purchaser; 

(b)  Selling  him  the  goods; 

(c)  Delivering  goods  purchased; 

(d)  Securing  payment; 

(e)  Building  up  good-will  which  will  materialize 
in  continued  and  increasing  business. 

Although  in  most  cases  it  is  necessary  for  the  seller  to 
exert  himself  in  order  to  secure  prospects  and  sales, 
occasionally  goods  are  sold  on  the  basis  of  inquiry  initi- 
ated by  the  buyer. 

When  the  buyer  takes  the  initiative,  he  may  make 
his  inquiry  through  correspondence  direct  to  the  manu- 
facturer. A  second  method  is  that  of  undertaking  to 
buy  particular  goods  through  a  special  ])uyer,  who  comes 
on  a  buying  trip  to  this  country.  In  the  third  place, 
some  of  the  more  important  foreign  importers  maintain 
resident  buying  agents  in  the  United  Slates,  just  as  im- 
portant American  concerns  maintain  foreign  buying 
representatives  in  various  parts  of  the  world.  Lastly, 
the  manufacturer  may  receive  orders  without  solicita- 
tion from  export  commission  houses  or  export  mer- 
chants, but  here  as  elsewhere  the  seller  must  usually 
take  the  initiative  and  he  may  bring  his  goods  to  the 
attention  of  the  export  merchant  or  export  commission 
house  either  by  means  of  the  usual  correspondence  and 
advertising  or  by  personal  solicitation  or  otherwise. 

The  buyer  foi-  an  export  commission  house,  in  filling 
an  order  oi-  indent,  will  frequently  send  out  requests  to 
various  manufacturers  for  quotations.     Sometimes  he 

310 


EXPORT  SALES  METHODS  311 

places  his  order  with  firms  from  which  he  has  been  ac- 
customed to  purchase,  without  further  inquiry.  Occa- 
sionally the  manufacturer  will  find  it  possible  to  get  at 
the  export  merchant  or  export  commission  house  more 
effectively  through  an  agent  located  in  the  port.  Since 
this  tends  to  add  another  middleman  it  is  not  to  be  en- 
couraged. Although  sales  to  export  commission  houses 
relieve  the  exporter  of  the  routine  of  foreign  shipment 
and  financing,  this  method  is  subject  to  the  disadvan- 
tage that  purchases  are  frequently  made  purely  on  the 
basis  of  price.  Furthermore  the  manufacturer  who 
wishes  to  build  up  good-will  in  various  markets  for  his 
trade-mark  will  ordinarily  not  find  selling  through  com- 
mission houses  the  most  effective  method.  Such  houses 
frequently  use  their  own  trade-marks  in  selling  to  for- 
eign markets.  Nevertheless,  the  benefits  to  be  derived 
through  combinations  of  small  orders,  cheaper  freight 
and  insurance  rates,  which  are  primarily  of  benefit  to 
the. buyer,  are  not  to  be  overlooked  in  competition  with 
particular  markets,  if  we  leave  out  of  account  the  neces- 
sity for  selling  on  a  price  basis,  the  cost  of  getting  busi- 
ness from  these  houses  is  not  great;  and  where  the 
manufacturer  does  not  contemplate  a  further  develop- 
ment of  foreign  business,  no  special  home  organization 
is  necessary.  Since  the  sources  of  orders  received  by 
commission  houses  are  often  unknown  to  the  manufac- 
turer, he  has  no  basis  for  knomng  the  markets  in  which 
his  goods  are  finding  favor  and  has  a  very  slight  basis 
for  developing  direct  exporting  without  much  further 
study.  Experienced  exporters  frequently  refuse  to  sell 
through  commission  houses  unless  they  are  informed  as 
to  the  destination  of  the  goods,  so  that  they  may  protect 
exclusive  agencies  in  various  markets  and  avoid  uninten- 
tional violation  of  contract. 

The  manufacturer  who  aims  to  sell  direct  to  foreign 
buyer  or  who  wishes  to  build  up  good-will  for  his  firm 
and  for  his  product,  will  find  that  in  general  the  same 
means  are  open  to  him  to  develop  foreign  sales  that  he 


312     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

uses  in  making  domestic  sales.     Among  these  are  the 
following : 

(1)  Mail  campaigns.     Circularization,  correspond- 
ence, samples. 

(2)  Advertising.    Various  media,  periodicals,  pos- 
ters, souvenirs,  etc. 

(3)  Personal  salesmanship.     Solicitation  by  sales- 
men or  officers  of  firm. 

(4)  Eesident  agents,  who  utilize  advertising,  per- 
sonal salesmanship,  etc. 

(5)  Reciprocal  relationship  involved  in  investment 
of  capital  in  foreign  countries. 

These  will  be  considered  in  turn. 

The  possibilities  of  mail  campaigns  in  developing  for- 
eign markets  are  frequently  overlooked.  While  the  re- 
sults are  slower  than  in  domestic  campaigns,  there  is  the 
advantage  of  lower  cost.  Lists  of  thousands  of  buyers 
may  be  secured  at  small  cost.  Trade  lists  are  published 
or  made  available  by  the  Department  of  Commerce,  the 
export  trade  journals  and  some  trade  associations. 
Among  directories  one  of  the  most  useful  publications 
is  the  large  Directory  of  Merchants,  Manufacturers  and 
Shippers  of  the  World  published  bj^  the  Kelly  Publish- 
ing Company.  While  mail  campaigns  reach  large  num- 
bers of  buyers,  there  is  a  distinct  element  of  weakness 
in  circularization,  particularly  in  competition  with  per- 
sonal salesmanship  of  competitors.  To  reach  markets 
where  personal  salesmanship  is  too  expensive,  to  arouse 
interest  in  a  product  for  agencies  or  in  preparation  of 
visits  of  salesmen,  mail  campaigns  have  much  to  recom- 
mend them.  Every  logical  plan  for  the  development  of 
the  foreign  market  will  include  mail  selling  effort.  The 
manufacturer,  wlio  has  used  mail  campaigns  in  domestic 
markets,  knows  that  in  such  campaigns  waste  may  be 
multiplied  by  carelessness  in  making  up  mail  literature. 
He  knows  also  that,  if  he  depends  upon  dealers  for  dis- 
tribution, he  cannot  conduct  a  campaign  for  direct-to- 
consumcr  selling  without  meeting  satisfactorily  the  ob- 
jection of  dealers. 


EXPORT  SALES  METHODS  313 

The  novice  in  foreign  trade  will  be  surprised  at  the 
widespread  nse  of  samples  as  compared  to  domestic 
trade.  Sampling  is  the  universal  means  of  conveying 
information  about  products  to  foreign  buyers.  Sam- 
ples as  used  in  foreign  trade  may  be  classified  as  follows : 
(1)  Analysis  samples,  sealed  samples  which  have  to  be 
or  have  been  anal^^zed  by  chemical  experts.  (2)  Stand- 
ard samples  or  types,  upon  the  basis  of  wliicli,  for  in- 
stance, raw  products  such  as  coffee,  tea,  sugar,  tobacco, 
wheat  or  cotton  are  sold  for  future  delivery.  Usually 
the  type  is  a  sample  of  produce  taken  from  the  previous 
year's  growth.  In  the  leading  business  centers,  speci- 
mens or  types  of  ditferent  commodities  dealt  in  are  kept 
for  purpose  of  reference  at  the  office  of  the  local  chamber 
of  commerce  or  the  headquarters  of  the  various  brokers' 
associations.  In  case  of  sufficiently  important  varia- 
tions, the  matter  is  generally  submitted  to  the  arbitra- 
tion of  experts,  a  fact  which  denotes  that  the  sale  on 
tyi)e  basis  implies  great  confidence  between  the  con- 
tracting ])arties.  (3)  Buyers'  samples  and  counter 
samples—inquiries  from  overseas  customers  are  often 
accompanied  by  samples  intended  to  supplement  the 
written  descriptions  of  the  goods  wanted  and  which  we 
may  call  "buyers'  "  samples.  The  exporter  submits 
these  samples  to  local  manufacturers,  obtaining  from 
them  in  return  counter  samples  of  similar  or  nearly 
similar  goods.  (4)  Reference  or  shipping  samples — 
these  are  actual  portions  taken  from  the  goods  about 
to  be  delivered  and  forwarded  by  the  seller  to  the  buyer 
for  purposes  of  reference.  In  the  case  of  raw  products 
and  semi-manufactured  goods  they  are  known  generally 
as  shipping  samples.  Such  samples  enable  the  buyer 
to  formulate  his  objections  without  delay,  possibly  be- 
fore delivery  should  the  reference  samples  prove  the 
goods  to  be  unsuitable,  or  to  dispose  of  his  purchase 
before  it  reaches  his  hands,  and  finally  to  check  the 
goods  on  arrival  by  comparison  with  the  reference  sam- 
ples. Reference  samples  are  not  samples  on  the  basis 
of  which  the  order  was  originally  given.     (5)  The  most 


314    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

common  type  of  samples  is  the  selling  sample  used  by 
salesmen,  travelers,  agents,  and  brokers.  Samples 
which  can  be  used  economically  are  frequently  sup- 
plied to  applicants  at  considerable  rebate  on  the  whole- 
sale prices. 

We  may  say  that  the  sample  method  is  used  even 
in  the  case  of  large  electrical  installation,  where  exist- 
ing installation  servos  as  a  sample  for  other  commodi- 
ties of  the  same  type.  The  manufacturer  who  expects 
to  enter  foreign  trade  must  early  decide  upon  his  sample 
policy.  If  the  product  is  new,  if  the  use  is  not  well 
known,  samples  must  be  placed  in  the  hands  of  pros- 
pective buj^ers.  In  placing  these  samples,  however,  it 
is  possible  to  incur  very  great  waste.  There  are  per- 
sons all  over  the  world  who  are  known  as  sample  col- 
lectors, whose  interest  in  the  product  persists  only  until 
free  samples  are  secured.  They  can  do  little  or  nothing 
for  the  sale  of  the  product,  and  samples  sent  to  them  are 
a  total  loss.  Where  the  product  is  one  of  value  it  is 
frequently,  perhaps  always,  best  to  make  a  charge  for 
it.  The  plan  followed  by  many  manufacturers  is  that 
of  giving  a  liberal  discount  upon  samples;  in  such  a 
case,  a  request  for  samples  indicates  some  real  interest 
in  the  product.  A  judicious  use  of  samples  is  essential 
for  the  successful  u|)])uildiiig  of  foreign  business  in 
many  lines.  Salesmen  must  be  supplied  with  samples 
where  possible.  However,  unnecessary  bulk  should  be 
avoided.  Both  on  account  of  cost  of  transportation  and 
frequent  taxes  and  tariffs,  samples  may  involve  large 
additional  expense. 

The  function  of  adA^ertising  in  export  trade  is  pre- 
cisely the  same  as  in  domestic  trade.  Advertising  may 
be  used  as  a  means  of  creating  dealer  demand,  dealer 
preference,  or  consumer  demand  or  acceptance.  Ad- 
vertising may  be  used  to  prepare  the  way  for  the  sales- 
man, to  enable  him  to  make  a  greater  volume  of  sales 
than  otherwise  would  be  possible.  Advertising  may  be 
used  likewise  to  help  move  the  products  from  dealers' 
shelves.     Several  problems  confront  the  exporter  who 


EXPORT  SALES  METHODS  315 

wishes  to  advertise  his  products  in  a  foreign  land:  the 
formulation  of  advertising  policy,  the  estimate  of  appro- 
priation, the  selection  of  media,  and  the  preparation  of 
advertisements.  The  formulation  of  policy  will  depend 
largely  upon  the  opinion  of  the  export  manager  as  to 
the  efficacy  of  advertising  a  particular  product  in  given 
markets.  The  appropriation  to  be  made  for  foreign 
advertising  will  depend,  of  course,  upon  the  general 
financial  budget,  and  the  amount  which  can  be  allocated 
to  the  development  of  foreign  sales.  Foreign  advertis- 
ing campaigns  may  be  planned  for  as  wide  a  range  of 
appropriations  as  in  domestic  selling.  The  variation 
from  modest  initial  advertisements  to  world-wide  cam- 
paigns offers  possibility  of  meeting  any  set  of  conditions 
imposed  by  character  of  product,  size  of  concern,  or 
other  factors. 

Keeping  in  mind  differences  in  purchasing  power, 
purchasing  habits,  and  habits  of  thought,  the  same  prin- 
ciples apply  to  the  preparation  of  foreign  advertising 
as  to  domestic.  However,  that  does  not  mean  that  an 
advertisement  which  ranked  high  in  selling  power  in 
the  United  States  would  so  rank  in  Argentina.  In  illus- 
tration and  wording,  the  appeals  will  be  consistent  ^vith 
the  customs  and  habits  of  the  country  to  which  the  ad- 
vertising is  directed.  Amusing  instances  are  related 
of  American  manufacturers  who  have  not  been  suffi- 
ciently careful  in  choosing  illustrations  or  in  translating 
domestic  selling  arguments. 

The  advertising  media  available  to  the  exporter  are 
as  varied  as  in  the  domestic  market.  In  addition  to 
direct-mail  advertising  through  circulars  and  corre- 
spondence, there  is  a  possibility  of  advertising  in  direc- 
tories, and  in  a  number  of  classes  of  periodicals,  both 
domestic  periodicals  intended  for  export  trade  and  for- 
eign periodicals  in*  the  various  markets.  As  in  the 
United  States  these  may  be  divided  into  general  periodi- 
cals, class  periodicals,  and  trade  journals,  and  the  con- 
siderations affecting  their  value  as  advertising  media 
do  not  differ  from  domestic.     Foreign  newspapers  are 


316    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

also  frequently  used  as  a  means  of  developing  consumer 
and  dealer  interest.  In  certain  countries  the  high  per- 
centage of  illiteracy  renders  posters  and  lithographs 
particularly  valuable  as  a  means  of  advertising.  Not 
a  few  manufacturers  today  believe  that  the  motion  pic- 
ture has  very  great  possibilities  in  export  advertising. 
Since  international  trade  is  carried  on  largely  on  the 
basis  of  samples,  it  is  not  strange  that  elaborate  ar- 
rangements have  been  made  for  the  display  of  samples 
in  various  countries.  Both  periodical  and  permanent 
displays  have  been  developed  through  the  so-called 
''fairs,"  the  chief  of  which  are  those  held  in  Brussels, 
Lyons,  and  Leipzig,  and  the  sample  exhibitions  main- 
tained in  various  countries.  Mention  should  be  made 
also  of  novelties  and  souvenirs  in  foreign  advertising, 
such  media  frequently  being  much  more  effective  than 
in  the  United  States. 

The  success  of  the  manufacturer  in  developing  for- 
eign business  will  depend  not  alone  upon  the  care  with 
which  he  undertakes  his  advertising  nor  the  care  with 
which  he  handles  his  traveling  salesmen  in  foreign  mar- 
kets, but  upon  the  care  with  which  he  handles  both  and 
correlates  their  efforts.  It  may  be  said  that  the  suc- 
cessful manufacturer,  in  developing  foreign  business 
by  means  of  traveling  salesmen,  will  depend  to  a  greater 
extent  upon  the  ability  and  personality  of  the  salesmen 
and  less  upon  the  qualit}",  utility  and  appearance  of  his 
wares  than  in  the  case  of  domestic  sales.  Salesmen 
sent  out  into  foreign  countries,  where  language,  customs, 
and  methods  of  living  are  different,  will  meet  with  many 
problems  which  in  the  domestic  organization  would  be 
solved  at  once  by  long  experience,  by  custom,  or  by 
reference  to  the  sales  executive.  It  is  essential  that 
the  salesman  know  his  product  and  how  to  sell  it,  but 
he  must  give  up  the  idea  that  the  details  of  American 
selling  methods  can  be  applied  indiscriminately. 

In  increasing  measure  America  will  owe  a  preference 
for  its  products  in  export  trade  to  its  investments  in 
foreign  countries.     Before  the  war  England,  Germany, 


EXPORT  SALES  METHODS  317 

and  France  as  creditor  countries  owed  a  large  volume 
of  their  export  trade  to  investment  in  overseas  enter- 
prises. Where  foreign  capital  was  used  to  finance  a  rail- 
w^ay  in  Argentina,  an  electric  railway  in  Brazil,  or  a 
power  plant  in  China,  it  was  almost  invariably  provided 
that  the  supplies  used  in  its  construction  should  be  pur- 
chased in  the  country  from  which  the  funds  for  financing 
were  drawn.  In  addition,  such  financing  created  a  basis 
of  good-will  which  is  reflected  in  trade  statistics. 

A.  Selection  of  Selling  Methods: 

1.  Considerations  affecting  the  choice  of  selling  methods. 

2.  Advertising  and  correspondence  as  a  means  of  effecting 
sales. 

Under  what  conditions  shall  a  concern  attempt  to  effect 
sales  purely  by  means  of  advertising? 

What  forms  of  advertising  should  be  used? 

Should  advertising  be  local  or  should  it  cover  the  country 
or  continent? 

What  advertising  media  should  be  used? 

Should  a  catalog  be  used?  If  so,  what  should  be  its 
form  and  how  should  it  be  prepared? 

o.  Forms  and  amount  of  personal  solicitation  to  be  used. 

Under  what  conditions  shall  a  concern  attempt  to  effect 
sales  purely  by  means  of  personal  solicitation  through 
salesmen  ? 

Are  salesmen  necessary  if  exclusive  agents  are  appointed? 

To  what  extent  should  the  salesman  be  a  missionary 
salesman  aiding  the  retailer  in  selling  goods? 

4.  Correlation  of  advertising,  personal  salesmanship,  and  cor- 
respondence. 

How  can  personal  salesmanship  and  advertising  be  com- 
bined to  produce  greatest  selling  efficiency? 


318    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

B.  Advertising  : 

Should  a  concern  in  export  trade  use  purely  publicity 
advertisiiig-  or  should  it  attempt  to  sell  its  goods  through 
advertising? 

What  forms  of  advertising  are  to  be  used  as  a  means  of 
creating   consumer   demand   in   export   markets? 

How  can  advertising  be  used  as  a  means  of  creating  good- 
will among  prospective  dealers  ? 

What  should  be  the  basis  of  tlie  export  advertising  ap- 
propriation ? 

What  are  the  elements  of  strength  and  weakness  of  direct- 
mail  advertising  in  foreign  trade  ? 

Should  the  concern  advertise  in  domestic  periodicals  in- 
tended for  ex]ioi-t  trade?  If  so,  how  are  they  to  be 
selected  ? 

If  decision  is  made  to  advertise  in  foreign  periodicals, 
how  is  the  advertising  to  be  handled? 

Where  is  it  possi])le  to  get  information  regarding  circula- 
tion and  value  of  foreign  periodicals  as  advertising  media  ? 

To  whom  shall  export  advertising  be  directed? 

What  appeals  should  be  used  in  export  advertising? 
Should  the  same  appeals  be  used  in  both  domestic  and 
foreign  advertising  ? 

How  is  the  ex])ort  advertiser  to  guard  against  faulty 
translation  ? 

With  a  given  advertising  appropriation,  is  it  better  to  use 
a  number  of  insertions  with  small  space  or  a  few  inser- 
tions with  large  space  ? 

What  precautions  are  necessary  in  connection  with  the 
use  of  color  and  illustration  in  foi-eign  advertising? 

How  are  the  various  advertising  media  to  be  coi-related  in 
foreign  advertising  campaigns? 

How  is  it  possible  to  check  advertising  in  foreign  publica- 
tions, whether  handled  directly  or  through  advertising 
agencies  ? 


EXPORT  SALES   METHODS  319 

C.    EXF'ORT    CoRRKSI'ONDENnE  : 

1.  Sioiiificaiico  of  correspondenee  in  export  trado. 

How  does  the  general  tenoi'  of  export  corresjiondeiuM' 
dift'ei-  from  domestic  .' 

How  does  the  inipoi'tanee  of  correspondence  as  a  means 
of  selling  in  export  trade  compare  with  its  importance 
in  domestic  trade  1 

Why  is  it  necessary  to  use  extreme  care  in  writing  to 
foreign  buyers  or  prospects? 

2.  The  language  of  correspondence — translation. 

Should  the  exporter  employ  his  own  translators  or  depend 
upon  outside  agencies?  If  the  latter  course  is  pursued, 
what  precautions  should  he  taken  to  guard  against 
misunderstandings  ? 

If  tlie  exportei'  employs  his  own  translators,  to  what 
extent  should  they  be  responsible  for  the  contents  of  the 
correspondence?  Should  they  merely  translate  letters 
already  prepared  by  export  executives? 

3.  Handling  inquiries. 

What  methods  should  be  used  in  handling  inquiries  from 
foreign  buyers  or  prospective  buyers? 

How  should  follow-ups  be  handled  when  sales  are  made 
direct  ? 

How  should  follow-ups  be  handled  when  sales  are  made 
through  agents,  commission  houses,  etc.? 


4.  Sales  letters  in  export  trade  versus  domestic  sales  letters. 

How  does  the  view-point  of  the  foreign  buyer  affect 
the  tone  of  the  sales  letter  written  b}^  the  American 
exporter  ? 

What  variations  in  length,  personal  references,  etc.,  are  to 
be  found  in  foreign  correspondence? 

What  considerations  make  it  even  more  important  for 
the  foreign  than  for  the  domestic  sales  letter  to  be  con- 
cise and  clear? 


320    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

D.  The  Use  of  Cables  in  Export  Correspondence: 

To  what  extent  should  the  export  executive  permit  and 
encourage  the  use  of  cables  by  salesmen? 

Should  ]>ublic  or  private  cables  be  used? 

Sliould  messages  be  sent  in  cipher  ? 

ilow  can  accuracy  of  cables  sent  out  by  the  exporter  be 
assured?  Ls  it  advisable  to  have  messages  coded  and  de- 
eo(UHl,  thus  causing  them  to  pass  through  the  liands  of  at 
k^'Hst  two  employees?  IIoav  should  cables  from  abroad  be 
acknowledged? 

How  should  the  firm's  cable  system  be  made  known  to 
the  foreign  customer?     Should  it  be  registered? 

llow  can  cables  be  used  to  cut  costs  in  ('X]-)Oi-t  selling? 

E.  The  Export  CataI/Og  : 

Is  it  advisable  for  the  individual  concern  to  use  an  export 
catalog?  Would  the  results  obtained  justify  the  ex- 
penditure ? 

How  can  the  catalog  l)e  i)re])ai"ed  to  miuimiz(»  the  cor- 
I'espondeucc  necessary  in  (effecting  sales? 

What  method  should  be  adopted  with  regard  to  illustra- 
tions, quoting  of  prices,  descriptions,  weights  and  mea- 
sures, selling  arguments,  language,  stock  of  cover  aiul 
inside  pages,  size,  coding  of  articles,  etc.? 

Should  the  catalog  be  sent  out  prior  to  the  visit  of  tlie 
salesman.' if  salesmen  are  used? 

Sliould  the  catalog  be  used  mei'ely  to  create  interest  or 
to  effect  sales?  Will  it  shorten  time  i-ecpiircMl  for  develop- 
ment of  foreign  market  ? 

How  should  catalog  rights  be  prolceted  in  foreign 
countries  ? 

Sliouhl  the  catalog  be  sent  to  all  in(|uirers? 

How  do  the  customs  duties  of  the  various  countries  affect 
the  pre])ai-taion  of  the  catalog? 


EXPORT  SALES  METHODS  321 

Problem  78 

National  Machine  Tool  Corporation — Choice  of  Selling 

Methods* 

The  National  Machine  Tool  Corporation,  formed  in 
the  spring  of  1922,  was  a  consolidation  of  four  large 
manufacturers  of  machine  tools  and  was  capitalized  for 
$20,000,000.  The  constituent  firms  taken  together  manu- 
facture a  complete  line  of  machine  tools,  specializing 
however  in  tools  for  heavy  duty  such  as  heavy-duty 
wheel  and  axle  lathes,  boring  mills,  slomers,  slotters, 
planers,  including  crank  and  plate-edge  heavy-duty 
drilling  machines,  external  and  internal  cylindrical 
grinding  machines,  horizontal  and  vertical  milling  ma- 
chines, horizontal  and  vertical  punches,  shears  of  vari- 
ous types,  cold  saws,  bending  and  straightening  rolls, 
automatic  dye  heads,  miscellaneous  small  tools,  and  a 
complete  line  of  shop  equipment. 

In  the  domestic  market  the  companies  have  generally 
followed  the  practice  of  selling  through  their  own 
branches  in  industrial  centers  and  through  machinery 
dealers  in  other  sections.  In  the  foreign  market  two 
of  the  constituent  companies  have  sold  only  upon  order 
through  export  commission  houses  or  export  merchants 
or  upon  receipt  of  direct  orders  from  consumers,  in 
which  case  they  shipped  through  commission  houses. 
The  third  concern  has  given  the  exclusive  agency  for 
its  products  in  Europe  to  a  firm  located  in  Coventry. 
This  agent  represents  a  number  of  American  manufac- 
turers and  is  also  engaged  in  mamifacturing  a  certain 
type  of  machine  tools  on  his  own  account.  A  sales  force 
is  maintained  to  call  upon  machinery  dealers  and  pros- 
pective large  customers  in  all  the  western  European 
countries.  The  National  Corporation  is  confronted  with 
the  problem  of  whether  it  should  maintain  this  repre- 

*Upon  selling  methods  in  foreign  trade,  see  the  various  general  works 
upon  foreign  trade,  particularly  under  the  headings  "Traveling  Sales- 
men" and  "Advertising."  Numerous  references  are  to  be  found  also  in 
the  periodicals  dealing  with  export  trade  and  in  those  dealing  with  ad- 
vertising. 


322     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

sentation  and  is  somewhat  inclined  to  do  so,  since  it  feels 
that  for  some  time  to  come  it  should  not  establish 
branches,  at  least  not  nntil  the  volume  of  trade  in  par- 
ticular markets  is  larger  than  at  present.  The  officers 
of  the  company  realize  that,  unless  active  measures  are 
taken  to  sell  tools,  no  increase  in  volume  can  be  expected. 
(The  fourtli  manufacturer  has  done  no  foreign  busi- 
ness.) 

Several  proposals  have  been  made — first,  that  the 
company  prepare  a  series  of  catalogs  in  foreign  lan- 
guages, which  shall  give  complete  descriptions  of  the 
tools  and  of  the  work  which  the}^  will  do.  Secondly,  that 
salesmen  with  technical  training  and  with  experience 
in  foreign  markets  be  employed  to  call  upon  machinery 
dealers  and  large  users  in  foreign  countries,  soliciting 
orders  which  would  be  turned  over  to  local  agents  if 
these  happen  to  have  exclusive  territory.  A  third  pro- 
posal is  to  make  arrangements  for  taking  a  series  of 
motion  pictures,  which  will  not  only  show  the  machines 
in  operation  in  typical  establishments  but  also  how  the 
machines  are  manufactured  and  give  an  idea  of  the  ex- 
tent and  size  of  the  plants  of  the  National  Machine  Tool 
Corporation.  A  further  suggestion  is  that  the  company 
should  exhibit  some  of  its  important  machines,  which 
are  properly  protected  by  patents  in  foreign  countries, 
at  the  Lyons  fair* ;  also  that  the  company  maintain  a 
permanent  exhibition  at  the  Bush  Terminal. 


*The  Lyons  Fair  lias  boon  held  every  spring  and  fall  since  1916,  when 
it  was  started  by  the  mayor  of  the  city  in  competition  with  the  Leipzig 
Fair.  No  retail  selling  is  done,  but  orders  are  taken  for  future  de- 
liveries. Different  ])arts  of  the  city  are  set  aside  for  the  various  classes 
of  goods.  The  trade  sections  which  are  re])resented  at  the  spring  fair  are 
not  eligible  for  exhibition  at  the  fall  fair.  The  fair  is  not  conducted  for 
profit,  iDut  charges  are  made  simply  to  meet  expenses;  it  is  endorsed  by 
the  French  Government,  the  City  Council,  and  the  Chamber  of  Commerce 
of  Lyons.  The  United  States,  Eurojie,  Asia  and  Ijatin  America  are  repre- 
sented  by  exhibitors  and  visitors. 


EXPORT  SALES  METHODS  323 

Problem  79 

The  Madden   Company — Developing   New  Territory* 

In  an  attem])t  to  increase  its  foreign  trade  the  Madden 
Company  is  considering  the  best  method  of  breaking 
into  new  territory.  This  firm  manufactures  paper 
clips,  ink  wells,  inks,  mucilage,  and  other  small  metal 
and  glass  office  supplies.  Because  of  the  present  busi- 
ness depression  in  the  United  States  its  domestic  sales 
are  not  increasing  as  rapidly  as  formerly,  and  the  offi- 
cers of  the  company  believe  that  the  domestic  market 
is  being  flooded  with  similar  products.     Since  this  has 

*Upou  direct-mail  selling,  see  Hough,  Practical  Exporting,  Chap.  V; 
Wyman,  Export  Mcrchatidisiiuh  Chap.  XV;  and  the  following  periodical 
references : 

Printers'  InJc. 

May  26,  1921,  p.  57— "Making  Export  Profits  bv  Correspondence." 
June  30,  1921,  p.  2.3— "Better  Export  Sales  Letters." 
Oct.  15,  1921,  p.  5—"  Advertising  by  Direct  Mail  in  England." 
Export  Trade  and  Exporters'  Eevieiv. 

Sept.   25,   1920,  p.   5 — "Automatic   Notifications   to    Important   Cus- 
tomers. ' ' 
Dec.  25,  1920,  p.  5— "Sales  Promotion  bv  ^lai]." 
Mar.  19,   1921,  p.   18— "Colloquialisms  Puzzle   tlie   Translator  " 
July  16,   1921,  p.  5— "Postage  Due." 

Sept.  24,  1921,  p.  5— "Skillful  Translation   Cleans  More  Than  Dic- 
tionary Excellence. ' ' 
Xov.  19,  1921,  p.  IS— "Following  Up  Foreign  Letters." 
April  15,  1922,  p.  S— "Sales  Promotion  by  Mail." 

The  World's  Markets. 

Jan.  1920,  p.  28— "A  Word  for  the  Translator  " 
May  1921,  p.  23— "  How  to  Build  Foreign  Sales." 

Proceedings   of  annual  conventions.   National   Foreign   Trade   Council. 

^^il'  •^'•i^^.^''-  "^^   ^'-   ^-   Kascheu— "The   Modern   Languages   in 
1  heir  Kelation  to  Foreign  Trade  Eelations." 

While  all  the  works  upon  foreign  trade  touch  upon  the  subject  of  sam- 
ples, more  comp  ete  discussions  are  to  be  found  in  works  of  foi^ign  origin  • 
see  Dudeney,  The  Exporter's  Handbook  and  G'ossar,,,  Chap  XXIX  At- 
tention niay  also  be  called  to  Hough,  Practical  Exporting,  pages  sls-S'^'- 
and  the  following  periodical  references:  -^    i    s  °    — . 

The  World's  Markets. 

Aug.  1921,  p.  37— "How  to  Build  Foreign  Sales." 
Printers'  Ink. 

Sept.   9,   1920,   p.   33— "Sampling   in   Export   Selling." 
Export  Trade  and  Exporters'  Hevieu: 

^Plus.-  ^^^^'   ^'    •■^-"^^''^^'•^   Sentiment   Can    Be    Made    Efficiency 


324     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

resnllod  in  an  increased  unit  cost  of  selling  in  the  do- 
mestic market,  the  company  is  planning  to  build  up  its 
export  trade. 

This  firm  alread}'  has  some  foreign  trade,  its  product 
being  distributed  through  its  own  salesmen  in  some 
parts  of  Europe,  South  America,  Australia,  and  New 
Zealand.  The  managers  believe,  from  a  study  of  their 
present  export  business,  that  there  is  a  big  opportunity 
for  the  further  development  of  its  business  in  the  north- 
ern and  western  parts  of  South  xAinerica,  territories  not 
covered  by  their  salesmen.  There  is,  however,  but  little 
working  capital  to  invest  in  the  promotion  of  export 
business.  In  order  to  concentrate  the  company's  efforts 
the  managers  wish,  before  putting  a  salesforce  in  the 
field,  to  secure  at  the  least  expense  some  idea  of  the 
potential  market  for  their  products  in  Venezuela,  Co- 
lombia, Peru,  Ecuador,  and  Chile.  They  are  consider- 
ing, therefore,  whether  to  carry  on  the  preliminary  sur- 
vey and  development  of  the  new  territorj^  by  a  mail 
campaign  or  by  a  preliminary  visit  by  an  experienced 
foreign  salesman. 

If  a  salesman  is  sent  to  Colombia  aud  Venezuela  he 
will  be  able  to  make  an  analysis  of  the  conditions  and 
secure  first-hand  information  as  to  the  advisability  of 
introducing  office  supplies  into  these  countries.  He  will 
also  be  able  to  make  actual  contacts  with  the  dealers 
and  to  select  a  few  typical  merchants  through  whom  to 
introduce  this  merchandise.  He  will  likewise  be  in  a 
position  to  make  many  suggestions  as  to  changing  or 
modifying  the  product  in  order  to  meet  local  demands. 
To  send  out  a  salesman  on  such  a  trip,  however,  means 
a  high  sahiry  and  traveling  expense,  since  it  -will  take 
him  several  months  to  make  a  survey  of  Colombia  and 
Venezuela  alone.  Unless  he  actually  places  orders,  which 
would  require  more  time,  it  would  be  difficult  for  him 
to  make  an  adequate  report  as  to  whether  or  not  the 
dealers  are  really  interested  enougii  to  make  purchases. 

Tf  a  preliminary  campaign  by  mail  is  to  be  launched 
as  an  introductory   step,  a  mailing  list  can  easily  be 


EXPORT  SALES   METHODS  325 

secured  from  R.  G.  Dun  &  Co.,  the  American  Exporter, 
the  Bureau  of  Foreign  and  Domestic  Commerce,  or  a 
private  mailing  list  agency.  The  first  step  in  de- 
velo])ing  such  a  plan  is  to  send  out  a  circular  with 
interesting  illustrations  of  the  product  in  color  and  a 
self-addressed  envelope  with  form  for  a  reply.  The 
replies  can  then  be  followed  up  by  a  personal  letter  from 
the  export  manager  of  the  Madden  Company  and  a  cata- 
log of  the  products  the  company  is  ready  to  export. 
After  a  few  orders  ha\-e  l)een  secured  from  a  district 
l)y  mail  a  salesman  can  l)e  despatched  to  this  territory. 
Because  of  the  preliminary  work  the  salesman's  time  can 
be  devoted  to  calling  on  merchants  who  have  signified 
an  interest  in  selling  the  Aladden  Company's  product. 

One  of  the  main  difficulties  of  such  a  plan  is  that  the 
shops  in  Venezuela,  Colombia,  Peru,  Ecuador,  and  Chile, 
as  well  as  other  foreign  countries,  differ  so  widely  in  the 
type  of  goods  that  they  carry.  Thus  it  is  frequent! v 
impossible  to  tell  from  a  mailing  list  whether  or  not  a 
particular  merchant  will  l)e  in  position  to  stock  a  line 
of  office  supplies.  The  company's  circulars,  therefore, 
will  be  mailed  to  a  large  number  of  dealers  who  cannot 
possibly  be  interested  in  carrying  the  firm's  merchan- 
dise. Furthermore,  even  in  the  case  of  dealers  who  are 
interested,  few  v.ill  place  orders  on  the  basis  of  colored 
illustrations  and  a  fancy  catalog.  Frequently  these 
merchants  will  not  understand  all  the  uses  to  which 
the  Madden  Company's  products  may  be  put. 

Which  method  should  the  Madden  Companv  adopt  in 
developing^  new  territory ;'  Should  the  company  make 
an  offer  of  free  samples  in  its  direct-mail  advertising! 


32G     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  80 
The  Dunn  Company— Choice  of  Selling  Methods 

The  Dunn  Company  manufactures  cheesecloth  for  do- 
mestic use,  bandages  of  all  kinds,  jewelers'  cotton,  and 
absorbent  cotton.  In  the  domestic  market  its  product 
is  distributed  directly  to  the  hospital  trade  and  through 
the  wholesale  dry  goods  jobbing  trade  in  so  far  as  its 
products  are  used  for  household  purposes.  The  company 
sells  both  nnbranded  and  branded  goods.  It  advertises 
its  cheesecloth  and  its  absorbent  cotton  to  some  extent  in 
the  Ladies'  Home  Journal,  Woman's  Home  Companion, 
Good  Housekeeping,  and  in  similar  journals.  In  spite 
of  its  advertising,  the  domestic  market  is  not  a  stable 
one  from  week  to  week.  The  volume  of  orders  received 
may  vary  widely  at  all  times  of  the  year.  As  a  conse- 
quence, the  company  has  looked  with  much  favor  upon 
the  proposal  to  develop  its  foreign  trade.  In  the  past  it 
has  sold  some  quantities  destined  for  foreign  markets, 
mainly  on  the  basis  of  bids  made  to  commission  houses. 
The  goods  sold  were  nnbranded  and  there  was  no  reason 
to  expect  that  the  company  could  expect  any  continued 
growth  of  such  business  except  by  the  consistent  cutting 
of  prices  to  a  point  which  would  make  it  unprofitable. 

The  company  knows  that  it  is  in  as  good  a  position  as 
any  competitor  in  the  United  States  to  manufacture 
goods  of  quality  at  low  prices.  While  it  is  not  fully 
informed  as  to  the  extent  of  European  competition  in 
its  line,  the  efficiency  of  its  own  organization  is  such 
that  it  has  no  fear  of  German  or  English  manufacturers. 
In  the  plan  of  development  of  the  foreign  market  it  has 
been  decided  to  start  with  South  America.  Would  it 
be  wise  to  send  salesmen  to  South  America  at  once  or 
should  the  company  undertake  an  advertising  campaign 
preliminary  to  sending  out  salesmen*?  The  suggestion 
has  also  Ijeen  made  that  for  the  next  three  years  the 
company  contine  its  cnltiA-ation  of  foreign  markets  to  a 
direct-mail  cani]:)aigii  including  elaborate  sampling. 


EXPORT  SALES  METHODS  327 

Problem  81 
Hamilton  Oil  Company — Additional  Branches  vs.  Advertising 

For  the  past  twenty-one  years  the  Hamilton  Oil  Com- 
pany has  operated  a  branch  in  Buenos  Aires  covering 
Argentina,  Paraguay,  Urugua3%  and  the  southern  part  of 
Brazil.  The  rest  of  South  America  has  been  covered 
by  agents  located  in  Rio  de  Janeiro  and  Santiago  Avho 
have  covered  Brazil,  Chile  and  Peru,  by  the  appointment 
of  sub-agents  in  practically  all  the  large  cities,  and  by 
an  agent  located  in  Bogota  who  has  covered  Venezuela, 
Colombia,  and  Ecuador.  The  company  is  not  satisfied 
with  its  sales  volume  in  South  America,  nor  with  the 
manner  in  which  its  agents  have  been  conducting  the 
business.  Competitors  are  becoming  more  and  more 
numerous  and  the  directors  of  the  Hamilton  Oil  Com- 
pany are  convinced  that  their  organization  should  have 
established  branch  offices  in  order  to  check  up  the  work 
of  the  agents  and  assist  them  in  fighting  competition. 

The  first  plan  is  to  establish  branch  offices  in  Rio  de 
Janeiro,  Santiago,  and  Bogota  in  order  to  protect  the 
company's  interests  and  build  up  its  sales  volume  in 
the  surrounding  districts.  Each  branch  manager  would 
have  complete  charge  of  his  territory  with  power  to 
appoint  and  remove  agents  and  enter  into  all  contracts 
necessary  on  behalf  of  the  company.  He  would  also 
have  power  to  set  sales  quotas  for  each  agent  and  pass 
on  all  extensions  of  credit.  He  would  have  power  of 
attorney  to  represent  the  company  in  any  litigations 
that  might  arise  and  to  take  legal  steps  where  necessary 
to  protect  the  interests  of  the  company.  These  positions 
would  require  capable  executives,  but  at  present  the 
company  has  no  one  to  fill  them  except  men,  who,  al- 
Ihougli  tliey  possess  the  other  qualifications,  are  not 
familiar  with  the  language  and  customs  of  the  company's 
customers  in  South  America.  It  would  take  a  year,  or 
])ossibly  two  years,  to  train  these  men  to  fill  the  position 
of  branch  manager.     This  delay  would  be  particularly 


328     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

costly  since  competitors  are  losing  no  time  in  securing 
a  lioid  on  tlie  South  -American  market. 

To  avoid  this  delay  it  has  been  proposed  to  give  the 
entire  territory  of  South  America  to  the  present  branch 
manager  in  Buenos  Aires.  This  man  is  an  Argentine 
native  who  has  been  with  the  company  for  almost  forty 
years,  during  which  time  he  has  demonstrated  his  ability 
and  loyalty.  He  has  been  the  head  of  the  branch  in 
Buenos  Aires  for  the  past  sixteen  years,  and  is  thor- 
oughly familiar  with  the  languages  and  customs  of  the 
South  American  people.  By  giving  him  complete  charge 
of  the  South  American  territory  the  company  would  be 
catering  to  the  pride  of  many  Ijatin  Americans  in  deal- 
ing with  one  of  their  own  race.  This  man  has  all  the  de- 
sirable qualities  necessary  for  a  good  branch  manager 
and  his  appointment  to  this  important  post  would  be  a 
suitable  reward  for  his  long  service  with  the  company. 
The  chief  objection  which  stands  in  the  way  of  such  a 
decision  lies  in  the  fact  that  the  whole  of  South  America 
is  a  tremendously  large  territory  and  that  transportation 
between  the  different  parts  is  extremely  difficult.  In  the 
north  there  are  Init  few  railroads,  and  the  only  connec- 
tion with  the  cities  on  the  western  and  eastern  coasts  is 
by  boat.  Likewise,  Chile  is  separated  from  Argentina 
and  Brazil  by  the  Andes  Mountains  and  although  a  rail- 
road has  been  built  across  these  mountains,  considerable 
time  is  required  to  make  the  trip.  Coupled  with  this 
difficulty  is  the  fact  that  there  exists  among  some  of  the 
Latin  peoples  a  certain  amount  of  jealousy  and  dislike 
of  dealing  with  merchants  from  other  South  American 
states. 

The  third  plan  is  to  leave  the  present  organization  as 
it  is  and  attempt  to  increase  the  volume  of  business, 
first,  b}'  sending  salesmen  from  the  home  office  who  shall 
nominally  be  in  charge  of  the  agents  in  the  cities  visited, 
the  purpose  of  such  salesmen  being  to  assist  the  agents 
to  increase  business,  to  see  that  advertising  plans  are 
properly  carried  out,  and  in  general  to  act  as  the  com- 
jjany's  representatives  with  the  particular  agents  for 


EXPORT  SALES   METHODS  329 

the  period  of  the  stay  and  as  the  partners  of  the  agents 
in  carrying  on  their  business  in  Hamilton  oil.  The  sec- 
ond part  of  the  plan  provides  for  extensive  local  adver- 
tising to  be  scheduled  in  such  a  way  that  the  height  of 
each  local  campaign  shall  coincide  with  the  visits  of  the 
special  or  missionary  salesmen.  AVhich  plan  should  the 
Hamilton  Oil  Company  adopt? 

Problem  82 
Washington  Motor  Car  ('ompanv — Foreign  Advertising* 

The  AVashington  Motor  (*ar  Company,  maker  of  a 
low-priced,  six-cylinder  car  well  known  in  the  domestic 
market,  has  recently  entered  the  foreign  field,  having 
distributing  agencies  in  England,  Prance,  Denmark, 
Brazil,  Argentina,  Chile,  and  Mexico.  Contact  lietween 
the  company  and  its  agencies  is  maintained  through 
travelers   who    give    the    dealers    technical    information 

*Upon  advertisiuij  in  fureijiii  trade,  see  ^itardi,  Principles  of  Advertifiin!/, 
Chap.  XXXVl ;  Wyman  (Business  Training  Corp.),  Direct  Exporting,  Chap. 
VI;  Vedder,  American  Metliods  in  Foreign  Trade,  Chap.  XVJII;  Wolfe, 
Theory  and  Practice  of  Internationat  Commerce,  Chap.  XX;  Wyman,  Ex- 
port Merchandising,  Chap.  XVI;   and  artkdes  as  follows: 

The  Horld's  Markets. 

May  1919,  p.  27 — "Advertising  fur  Foreign  Tratle.  " 
May  19122,  p.  13— "Modern  Export  Methods." 

Proeeediugs  of  annual  couventions  of  National  Foreign  Trade  Council. 
1919,  p.  217,  Frank  A.  Arnold — "Survey  and  Method  of  Advertising 

for  Foreign  Trade. ' ' 
1919,  p.  248,  W.  G.  Hildebrant — "Foreign  Advertising  Successes." 

1921,  p.    281,    Elmer    11.    Allen— "The    Development    of    an    Export 
Business  Through  Advertising." 

1922,  p.   445,  William   Menkol— "  What   the   New   Export    Advertiser 
Needs  to  Know. ' ' 

Printers'  Ink. 

Jan.  9,  1919,  p.  129— "liow  to  Advertise  Abroad." 

May  22,  1919,  p.  123— "The  Globe-Trotting  Advertising  Man." 

July  31,  1919,  p.  121 — "Getting  the  Foreign  Atmo.sphere  in  Export 

Advertising. ' ' 
Feb.  26,  1920,  p.   97— "Horse  Sense  in   Foreign  Advertising." 
Nov.   18,   1920,   p.   77— "Helping   a    World   Organization   to   Adver- 
tise. ' ' 


330    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

and  sometimes  assist  them  in  maldng  sales,  but  so  far 
no  foreign  advertising  lias  been  done.  The  firm  has  re- 
cently made  an  initial  advertising  appropriation  of  $35,- 
000  for  the  first  year's  work  in  those  foreign  markets 
that  from  the  records  of  the  export  department  appear 
to  offer  immediate  promise,  but  no  definite  plan  of 
handling  this  Avork  has  as  yet  been  determined. 

The  problems  facing  the  Washington  Motor  Company 
in  launching  its  foreign  advertising  campaign  are  many. 
Because  of  its  lack  of  knowledge  of  foreign  languages 
and  the  appeals  necessary  to  make  advertising  effective 
in  the  different  countries  abroad,  the  company's  adver- 
tising department  is  handicapped  in  writing  copy.  To 
turn  this  matter  over  to  a  foreign  advertising  agency 
which  is  neither  familiar  with  its  product  nor  closely 
connected  with  the  sales  efforts  of  the  company,  how- 
ever, is  to  run  the  risk  of  failing  to  secure  adequate  re- 
turns for  the  money  expended.  The  selection  of  effect- 
ive media  is  even  more  difficult  inasmuch  as  there  are 

Export    Trade   &   Exporters'   Review. 

Apr.  19,  1919,  p.  13— "Advertising,'  to  the  World." 
Sept.  20,  1920,   p.  9 — "Local  Color  in  Export   Publicity." 

Journal  of  Commerce  and  Commercial  Bulletin. 

May   6,    1921 — "Simplicity   Need    in    Advertisinji;   Abroad." 
Upon  advertising  api>ropriations,   see  the  following : 

The  World's  Marlets. 

.June   1921,    p.   28 — "Foreign   Advertising   Approj)riations. " 

Export  Trade  &  Exporters'  Review. 

Jan.    21,    1922,    p.    22 — "Your    Export    Advertising    Appropriatiou 

for   1922." 
Feb.  25,   1922,  p.  5— |  "A  $10,000   Export  Advertising  Budget  for 
Mar.  4,   1922,  p.   13— f  1922." 

For  information  upon  advertising  media,  consult  the  following:  Cooper. 

Foreign  Trade  Marlets  and  Methods,  Chap.  XIV;  Filsinger  (Irving 
National  Bank),  Trading  With  Latin  America,  pages  102-105;  Vedder, 
American  Methods  in  Foreign  Trade,  Chap.  XIV;  and  the  following 
periodical   references : 

Printers '   InTc. 

Mar.  13,  1919,  p.  105— "The  Advertising  Mediums  of  China." 
Proceedings  of  annual  conventions  of  National   Foreign   Trade  Council. 

191(5,   p.   354,   J.   Eoland   Kay — "Utilization   of   Advertising   Media 
in  Foreign  Countries. ' ' 

1918,  p.  468,  Ernst  B.  Filsinger — "Successful  Advertising  Methods 
and  Mediums. ' ' 

1919,  p.  236,  Howard  G.  Winn*?—" Advertising  Media." 


EXPORT  SALES  METHODS  331 

no  audit  bureaus  or  other  organizations  of  advertisers 
or  advertising  agencies  that  can  check  circulation  state- 
ments. Sworn  statements  are  rarely  obtainable  and  the 
assertion  has  frequently  been  made  that  circulation 
claims  of  foreign  publications  are  limited  only  by  the 
audacity  or  integrity  of  the  publishers,  few  of  whom  are 
known  to  American  advertisers.  The  practice  of  main- 
taining a  standard  rate  is  practically  unknown  among 
foreign  publishers  and  only  by  continual  and  careful 
checking  is  it  possible  to  make  sure  that  an  appropria- 
tion is  wisely  expended. 

The  advertising  department  of  the  Washington  Com- 
pany has  been  handling  its  advertising  in  the  United 
States  in  conjunction  with  a  domestic  advertising 
agency.  This  agency  prepares  the  copy  with  the  help 
of  the  company's  own  advertising  department,  advises 
on  the  media  to  be  used,  and  assists  in  planning  the 
advertising  campaign.  The  advertising  department 
approves  all  copy,  follows  up  each  insertion,  checks  re- 
sults as  far  as  possible,  furnishes  the  agency  with  cuts 
and  practical  information,  and  adjusts  all  advertising 
plans  to  the  appropriation  budget. 

The  first  plan  contemplated  by  the  Washington  Com- 
pany is  to  have  its  foreign  advertising  handled  in  the 
same  way  as  its  domestic  advertising.  This  agency  is 
capable  and  efficient,  knows  the  Washington  car  thor- 
oughly, and  is  eager  to  handle  the  company's  foreign 
advertising.  Its  staff,  however,  knows  little  or  nothing 
about  foreign  trade  and  advertising  conditions  abroad, 
since  it  has  never  entered  this  field  to  any  extent.  The 
experience  of  other  manufacturers  has  proved  that 
methods  and  practices  of  the  domestic  field  cannot  al- 
ways be  employed  effectively  in  foreign  countries.  If 
the  domestic  agency  should  attempt  to  overcome  this 
handicap  by  securing  aid  from  foreign  advertising 
agencies  in  making  the  translations  and  placing  adver- 
tising, the  Washington  Company  would  be  dealing 
through  an  additional  middleman,  and  with  the  commis- 
sions divided  between  the  two  advertising  firms,  effi- 
cient service  could  scarcely  be  expected. 


3;52     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

To  overcome  this  difficulty  it  is  proposed  that  the  ad- 
vertising department  should  do  the  worlv,  with  the  help 
and  advice  of  the  export  department  whose  travelers 
report  on  business  conditions  abroad  and  frequently 
are  able  to  inform  the  company  of  the  media  recom- 
mended by  foreign  agencies.  Under  this  plan  the  com- 
pany would  be  sure  that  its  advertising  efforts  and  sales 
efforts  were  coordinated.  The  export  manager,  the 
traveler's,  and  the  foreign  agents,  however,  have  had 
no  experience  in  advertising;  the  advertising  depart- 
ment, on  the  other  hand,  is  not  experienced  in  preparing 
foreign  copy  and  has  no  statf  of  translators.  It  is  fre- 
quently difficult  to  secure  the  lowest  rate  from  foreign 
publishers  or  to  check  the  results.  In  turning  over  the 
foreign  advertising  campaign  to  the  advertising  depart- 
ment which  is  inexperienced  in  this  woi  k,  the  Washington 
Company  would  ])e  making  an  experiment  that  might 
prove  expensive  as  well  as  unsatisfactory. 

The  third  plan  is  to  employ  local  foreign  agencies  in 
each  market  in  order  to  obtain  the  advantage  of  having 
the  advertising  handled  by  an  organization  familiar 
with  local  conditions  abroad.  The  advocates  of  this 
plan  say  that  advertisements  with  greater  pulling  power 
should  result,  but  as  many  foreign  agencies  are  space 
brokers,  working  on  a  straight  commission  basis,  their 
first  regard  is  to  maintain  the  liighest  possible  rate  of 
expenditure  in  the  publications  that  pay  them  the  best. 
Although  the  foreign  advertising  agency  might  be  of 
service  in  carrying  out  instructions  under  strict  super- 
vision and  limitations,  its  remoteness  prevents  the  con- 
sultation and  joint  study  so  necessary  in  planning  a  suc- 
cessful campaign. 

American  foreign  advertising  agencies  have  been 
recommended  because  consultations  could  be  easily  ai- 
ranged  in  their  offices  in  the  U.  S.  and  because  they 
wouhl  1)0  more  familiar  witli  foreign  conditions  than 
domestic  agencies.  Too  I'lHHiuciitly,  however,  the  Ameri- 
can foreign  agency  is  in  reality  a  space  broker  or  adver- 
tising contract  agency  with  many  of  the  same  weak- 
nesses of  the  local  agency  abroad.    Depending  as  they 


EXPORT  SALES  METHODS  333 

do  entirely  on  commissions,  payable  when  bills  are 
rendered  to  the  advertiser  accompanied  by  proof  of 
insertion,  such  agencies  must  protect  their  own  inter- 
ests. Their  overhead  costs  for  keeping  themselves  in- 
formed of  rates  and  other  data,  as  well  as  maintaining 
their  organization  for  the  handling  of  orders  and  the 
checking  and  financing  of  insertions,  are  so  large  that 
they  cannot,  on  a  straight  commission  basis,  undertake 
efficiently  the  great  amount  of  work  necessary  to  over- 
come the  obstacles  to  success  in  a  foreign  advertising- 
campaign.  Furthermore,  foreign  agencies  usually  place 
their  orders  as  quickly  as  possible,  for  even  under  the 
best  conditions  they  must  wait  for  several  months  be- 
fore beginning  to  receive  returns  in  the  way  of  commis- 
sions on  advertising,  checking,  and  billing  to  clients. 

The  last  proposal  is  to  secure  the  services  of  an  over- 
seas advertising  agency  with  connections  abroad  as 
well  as  in  the  United  States.  This  type  of  organiza- 
tion, l)ecause  of  its  knowledge  of  foreign  conditions, 
U'ould  be  in  a  position  either  to  advise  the  advertising- 
department  in  the  preparation  of  copy,  or  to  prepare  the 
copy  itself  and  make  the  propei'  translations  into  the 
foreign  language.  To  overcome  the  same  objections  that 
apply  to  other  foreign  advertising  agencies  and  to  secure 
conscientious  service,  such  an  agency  should  be  relieved 
from  ha^dng-  to  depend  upon  commissions  from  foreign 
publications  for  its  expenses.  In  place  of  such  an  ar- 
rangement a  contract  Avould  be  drawn  up  whereby,  in 
return  for  a  monthly  retainer  of  approximately  $350  paid 
by  the  Washington  Company,  this  overseas  agency  would 
protect  the  interests  of  the  former,  and  give  advice  on  the 
preparation  of  advertising  and  the  selection  of  media.  In 
addition  it  would  receive  its  usual  commission  from  the 
foreign  publications  to  compensate  it  for  its  other  duties. 
This  plan  would  be  expensive  and  reduce  the  appropria- 
tion at  the  start  by  about  12%,  but  it  would  make  the 
advertising-  agency  really  an  agent  of  the  Washington 
Company  rather  than  a  space  broker  for  foreign  pub- 
lications. 


334    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Which  plan  should  the  Washington  Motor  Car  Com- 
pany adopt  for  tho  handling  of  its  foreign  advertising? 

Should  the  advertising  department  or  the  agency  write 
the  copy? 

How  sliouki  the  a[)i)ropi-iaii()ii  of  ^."irj/JUO  be  divided 
among  the  various  media  avaihil>le  in  Rngland,  Brazil, 
Argentina,  and  Afexico? 


Problem  83 
Reingold  Sewing  Machine  Company — Advertising  Policy 

Both  the  foreign  and  domestic  advertising  of  the  Rein- 
gold  Sewing  Machine  Compaiw  are  supervised  by  the 
domestic  advertising  department.  Although  this  depart- 
ment has  the  weakness  of  not  being  familiar  with  the 
psychology  of  appeal  necessary  in  the  foreign  fields  and 
has  sometimes  shown  a  tendency  to  use,  as  foreign  ad- 
vertising, copy  which  has  been  successful  in  the  United 
States,  it  has  not  been  deemed  advisable  to  have  a  sep- 
arate foreign  advertising  department.  Since  the  Rein- 
gold  Company  does  not  advertise  abroad  twelve  months 
of  the  year,  a  foreign  advertising  division  would  be  ex- 
pensive and  it  would  be  difficult  to  provide  continuous 
employment  for  the  staff. 

Because  the  company's  foreign  agents  are  more  fami- 
liar with  the  needs  of  their  markets  than  is  the  domestic 
advertising  department,  the  selection  of  media  and  the 
writing  of  copy  are  largely  left  to  their  discretion.  From 
time  to  time  the  Reingold  Company  sends  its  agents 
advertising  literature  and  electros,  but  except  for  occa- 
sional advice  and  mild  criticism  the  advertising  is  handled 
almost  entirely  by  the  foreign  agents.  Tlie  company  has 
laid  down  no  ironclad  rules  in  respect  to  the  advertising 
discount  allowed  its  agents  to  cover  the  cost  of  their 
jjublicity  work,  but  judges  each  agent  according  to  his 
needs.     Frequently,  in  addition  to  the  2%   advertising 


EXPORT  SALES  METHODS  335 

discount  which  is  usually  allowed,  the  agent  may  secure 
a  special  advertising  concession.  This  is  particularly 
true  in  a  growing  market  where  the  foreign  dealer  is 
using  his  o^^^l  capital  and  surplus  to  expand  his  business 
and  is  able  to  convince  the  company  that  it  would  be  a 
hardship  for  him  to  use  any  of  this  capital  for  pubhcity 
work. 

The  policy  of  the  Reingold  Company  is  held  by  several 
officials  to  be  wasteful.  Large  amounts  of  money  are 
sometimes  spent  in  a  foreign  market  mth  no  tangible 
returns.  It  is  recommended  that  the  company  increase 
its  advertising  discount  to  2147^  on  condition*  that  each 
agent  shall  spend  an  equal  amount  of  his  own  money  in 
this  work.  The  selection  of  media  and  the  writing  of  copy 
would  still  be  left  largely  to  the  agent's  discretion,  be- 
cause of  his  close  contact  and  familiarity  with  the  needs 
of  the  local  market.  However,  since  the  agent  would  pay 
half  the  cost,  it  is  almost  certain  that  reasonable  care 
would  be  used.  The  advertising  department  would  con- 
tinue to  give  advice  as  to  the  best  methods  of  advertis- 
ing, would  frequently  send  examples  of  good  advertising 
clipped  from  foreign  ]xn-iodicals,  and  would  assist  the 
agent  by  sending  him  electros  and  other  advertising 
helps.  In  order  to  secure  the  21/0%  discount,  the  agent 
must  submit  copies  of  each  advertisement  mth  a  state- 
ment as  to  its  cost.  In  this  Avay  the  company  will  have 
a  check  on  the  effectiveness  of  its  advertising  appropria- 
tion and  the  responsibility  for  results  will  not  be  left 
entirely  to  the  foreign  agents,  many  of  whom  have  had 
but  little  advertising  experience. 

To  what  extent  should  the  Reingold  Sewing  Machine 
Company  change  its  i)resent  advertising  policy? 


336     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  84 

Pembroke  Office  Equipment  Company — Advertising  by 
Principal  or  Agents 

After  establishing  agents  in  the  foreign  field  the  Pem- 
broke Office  Equipment  Company  itself  discontinued  all 
foreign  advertising.  Contracts  entered  into  with  its 
agents  provided  that  the  latter  should  spend  three-quar- 
ters of  one  percent  of  their  total  sales  in  local  advertis- 
ing and  that  the  company  should  furnish  electros,  stand- 
ard copy,  and  suggestions  for  circularizing.  Later  this 
plan  was  modified  slightly  and  the  company  agreed  to 
furnish  circulars  with  the  agent's  name  printed  thereon, 
which  could  be  distributed  to  prospective  customers. 

The  suggestion  has  been  made  by  the  head  of  an  ad- 
vertising agency  that  the  Pembroke  Company  should 
again  take  up  direct  advertising  in  the  foreign  field.  The 
company  maintains  a  direct  selling  organization,  which 
assists  its  agents  in  securing  orders  and  makes  sugges- 
tions as  to  new  methods  of  approach.  By  circularizing 
its  prospects  from  the  United  States  the  company  would 
better  estal)lish  its  product  and  trademark  in  the  minds 
of  its  Latin  American  and  European  customers.  People 
in  South  America  are  not  flooded  with  sales  circulars  to 
the  same  extent  that  dealers  are  in  this  country  and  a 
letter  from  a  foreign  firm  frequently"  makes  a  distinct 
impression.  Follow-up  circularization  by  the  local  dealer 
would  then  establish  the  position  of  both  the  Pembroke 
Company  and  its  agent  in  the  market.  Magazines  and 
trade  papers  frequently  have  a  wide  circulation,  and  a 
local  agent  cannot  be  expected  to  spend  his  money  build- 
ing up  sales  in  districts  outside  his  own  territory.  This 
type  of  advertising  media  should  therefore  be  handled 
by  the  company. 

The  Pembroke  Company  has  found  that  to  rely  on 
foreign  agents  to  carry  on  all  advertising  has  a  number 
of  disadvantages,  since  the  foreigner  can  scarcely  be 
expected  to  have  the  information  and  expert  knowledge 
of   the    manufacturing    company.      The    firm's    foreign 


EXPORT  SALES  METHODS  337 

agents  are  usually  not  advertising  men  and  their  at- 
tempts to  secure  publicity  are  frequently  inefficient  if 
not  almost  ludicrous.  These  agents  however  do  x^ossess 
a  knowledge  of  local  conditions,  customs,  and  buying 
habits  of  their  customers  and  they  should  be  able  to 
■select  the  type  of  copy  with  the  greatest  appeal.  The 
Pembroke  Company  is  loath  to  make  additional  appro- 
priations for  advertising  unless  it  appears  to  be  clearly 
advisable  to  do  so  and  it  is  considering  how  it  would 
be  possible  to  imjDrove  the  publicity  work  now  being  done 
by  its  foreign  agents. 


Problem  85 

Barcclona  Talking  Machine  Company — Control  of  Foreign 
Advertislng 

From  its  entrance  into  foreign  trade  until  the  present 
time  the  Barcelona  Talking  Machine  Company  has  left 
all  foreign  advertising  in  the  hands  of  its  branch  man- 
agers and  foreign  dealers.  Its  method  is  to  allow  an 
advertising  discount  of  2%  from  the  retail  price 
on  all  instruments,  providing  the  branch  manager  or 
dealer  spends  a  similar  amount.  Vouchers  showing  the 
amount  of  money  expended  are  considered  ample  evi- 
dence for  the  company  to  make  its  usual  advertising  al- 
lowance. That  this  plan  is  unsatisfactory  is  shown  by 
the  fact  that  one  dealer  has  been  sending  in  forged 
vouchers  and  that  several  other  agents  are  suspected  of 
having  entered  into  collusion  with  space  brokers  of  for- 
eign publications.  Even  when  dealers  are  known  to  be 
honest  they  frequently  are  not  experienced  advertisers 
and  without  doubt  a  portion  of  the  company's  appropria- 
tion for  advertising  is  not  wisely  expended. 

The  Barcelona  is  a  well-known,  nationally  advertised 
machine  with  a  long-established  reputation  for  quality 
of  tone.  Of  late  years  it  has  had  a  number  of  imitators 
and  competition  has  been  so  keen  that  this  firm  has  been 


338     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

forced  to  spend  between  $50,000  and  $60,000  in  adver- 
tising, giving  dealer  helps,  and  in  operating  retail  sales 
branches  in  order  to  hold  its  position  in  the  field.  As 
these  expenditures  frequently  have  been  out  of  propor- 
tion to  the  results  achieved,  the  Barcelona  Company  is 
not  in  a  strong  financial  condition,  and  it  is  imperative 
that  the  firm  receive  the  full  returns  from  any  expend- 
iture which  it  makes  for  foreign  advertising.  This  point 
is  doubly  important,  since  it  is  hoped  that  foreign  sales 
will  be  a  means  of  strengthening  the  company  materially. 
A  foreign  advertising  exporter,  who  has  been  consulted 
as  to  the  best  means  of  securing  advertising  control,  has 
advised  the  following  solution: 

"As  domestic  advertising  is  frequently  based  on  conviction, 
but  foreign  advertising  is  usually  based  on  persviasion,  for  the 
home  office  to  attempt  to  take  over  all  foreign  advertising  would 
be  a  serious  mistake ;  standardized  copy  which  would  be  certain 
to  develop,  would  be  almost  as  bad  as  though  domestic  copy 
were  used  abroad.  On  the  contrary,  the  company  should  con- 
tinue its  present  method  of  leaving  its  foreign  advertising  mainly 
in  the  hands  of  its  dealers  and  branch  managers  because  they 
are  familiar  with  local  conditions.  With  branches  in  London, 
Paris,  Milan,  and  Melbourne,  Australia,  and  with  agents  dis- 
tributed throughout  the  rest  of  Western  Europe  and  Latin 
America,  the  firm  has  such  a  strong  organization  on  the  ground, 
that  there  is  no  need  for  securing  the  services  of  a  foreign  adver- 
tising agency. 

"In  order  to  overcome  the  severe  handicap  due  to  lack  of 
advertising  experience  of  its  branch  managers  and  agents  the 
company  should  develop  a  series  of  interesting  cuts  to  be  fur- 
nished agents,  providing  they  will  pay  for  the  space  used.  Slides 
and  short  motion  picture  reels  showing  the  care  used  in  manu- 
facturing the  Barcelona  should  be  loaned  the  agent  providing 
he  is  willing  to  pay  for  having  them  shown  in  the  local  theatres. 
Colored  posters  should  also  be  supplied  on  condition  that  the 
agent  arranges  and  pays  for  the  necessary  billboard  space. 

' '  To  insure  that  all  money  is  properly  accounted  for,  a  ledger 
account  should  be  kept  for  all  advertising  aids.  When  $3,000 
is  spent  for  posters,  the  amount  should  be  entered  on  the  debit 
side  of  the  poster  account;  against  this  amount  should  be 
charged  on  the  credit  side  each  shipment  of  posters  made  to 
the  branches  and  agents.     Any  discrepancy  between  the  credit 


EXPORT  SALES  METHODS  339 

and  debit  sides  of  the  account  must  be  explained  by  the  adver- 
tising- manager.  En  addition,  each  merchant's  name  should  be 
entered  on  a  5  x  8  card,  on  the  back  of  which  a  record  would 
be  kept  of  the  advertising  helps  sent  him  and  the  date  on  which 
they  were  shipped.  A  follow-up  file  should  be  maintained  to 
facilitate  tracing  shipments  and  to  insure  the  delivery  of  the 
material. 

"The  composition  of  copy  and  the  selection  of  media 
should  not  be  left  entirely  to  the  judgment  of  the  agent  or 
branch  manager,  for  too  frequently  such  a  man  does  not  possess 
sufficient  training  to  discharge  these  duties  efficiently.  Instead, 
the  advertising  manag-er  should  send  each  agent  and  branch 
manager  carefully  selected  copy  suitable  for  his  particular 
needs.  This  copy  should  be  translated  into  the  foreign  language 
of  the  agent  who  would  make  any  modifications  necessary  to 
meet  local  conditions.  A  sample  layout  should  also  accompany 
the  copy  and  specific  instructions  should  be  given  as  to  the 
selection  of  advertising  media. 

"In  order  to  give  the  advertising-  manager  an  idea  of  condi- 
tions abroad  and  to  enable  him  to  select  appropriate  copy,  the 
Barcelona  Company  should  subscribe  to  the  leading  foreign 
newspapers  and  magazines.  From  these  publications  the  adver- 
tising manager  would  learn  the  Avidth  of  the  columns  and  the 
other  characteristics  of  the  publications  of  each  country.  He 
would  learn,  for  example,  whether  advertisements  were  concen- 
trated on  the  front  page  in  Danish  newspapers  or  whether  they 
were  scattered  throughout  the  entire  paper,  and  would  base  his 
suggestions  to  the  Copenhagen  agent  accordingly.  Having  for- 
eign newspapers  on  file  would  also  enable  him  to  clip  striking 
advertisements  of  competitors  and  other  firms  which  could  be 
sent  to  the  dealer  calling  attention  to  the  type  of  advertising 
other  firms  were  using  in  his  country. 

"Before  the  advertising  discount  is  allowed  the  agent  must 
submit  not  only  a  voucher  showing  the  amount  spent,  but  a  copy 
of  each  advertising  insert  as  well.  In  case  the  advertisement  is 
]iot  in  accord  with  the  instructions  of  the  advertising  manager, 
modified  to  meet  local  conditions,  or  in  case  the  advertisement 
appears  in  a  medium  which  is  Aveak  and  unsatisfactory  from  the 
company's  standpoint,  part  or  all  of  this  advertising  allowance 
may  be  withheld.  It  is  probable,  however,  that  it  would  not  be 
necessary  to  enforce  this  threat,  as  the  agent  would  be  careful 
to  comply  with  the  company's  regulations  once  he  was  informed 
that  the  advertising  allowance  might  be  withheld  should  he  fail 
to  do  so." 

Branch  managers  and  agents,  however,  have  operated 
under  decentralized  control  for  so  long  a  period  that  it 


3i0     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

would  undoubtedly  be  difficult  for  a  foreign  advertising 
manager  to  centralize  control  in  his  own  hands  without 
arousing  the  ill  will  or  even  open  hostility  of  the  foreign 
sales  representatives  of  the  company.  In  the  case  of  the 
branch  manager,  it  is  possible  for  the  company  to  order 
his  compliance  with  the  advertising  manager's  requests, 
but  in  the  case  of  dealers,  the  company's  control  must 
be  exercised  Avith  tact.  The  use  of  cuts,  motion  pictures, 
and  posters  in  addition  to  the  present  newspaper  adver- 
tising allowance  will  bring  the  company's  expenditure  for 
foreign  advertising  to  almost  3%.  Althougli  in  a  weak 
financial  condition,  the  firm  should  be  able  to  stand  this 
increase,  provided  returns  are  received  commensurate 
with  this  expenditure.  During  the  present  period  of  ex- 
treme competition,  however,  the  firm  is  unwilling  to  adopt 
a  radical  change  in  methods  unless  it  can  maintain  the 
good-will  of  its  foreign  organization  and  at  the  same 
time  secure  more  efficient  results  from  the  expenditure 
of  its  advertising  appropriation. 


Problem  86 

The  Gates  Optical  Company — Developing  Export  Sales  by 
Correspondence 

The  Gates  Optical  Company  was  established  in  1897 
for  the  manufacture  and  distribution  of  optical  goods, 
particularly  lenses,  metal,  xylanite,  and  imitation  tor- 
toise-shell frames,  mountings,  opera  glasses,  field  glasses, 
eye-glass  cases,  telescopes,  barometers,  and  thermome- 
ters, as  well  as  fountain  pens.  The  concern's  domestic 
business  amounts  to  over  $4()0,{)00.  Although  there  is 
at  present  no  reserve  sufficient  to  warrant  field  investi- 
gation or  a  large  introductory  campaign,  the  president 
desires  to  develop  a  foreign  market  for  the  company's 
products,  in  the  liope  that  this  development  will  serve 
to  offset  in  part  a  recurrence  of  the  experiences  through 


EXPORT  SALES  METHODS  341 

wliicli  the  company  passed  because  of  tlie  sudden  slump 
in  domestic  business  in  1920  and  1921. 

Mr.  Smith,  one  of  the  company's  most  intelligent  and 
energetic  young  men  who  has  been  acting  as  assistant 
sales  manager,  has  been  asked  to  take  charge  of  the  de- 
velopment of  foreign  demand.  In  addition  to  his  salary, 
the  board  of  directors  has  decided  that  a  maxinnnn  of 
$2,500  per  year  for  the  first  two  years  shall  be  set  aside 
for  dex'elopmental  purposes,  declaring  that  future  de- 
velopmental work  must  come  from  the  profits  of  the  for- 
eign business  itself.  Mr.  Smith  has  concluded  that  the 
small  appropriation  renders  it  impossible  to  employ 
salesmen  and  that  he  nmst  therefore  utilize  direct-mail 
and  other  forms  of  advertising.  After  a  study  of  the 
matter,  he  has  come  to  the  definite  conclusion  that,  out- 
side of  small  space  in  the  Spanish  and  Portuguese  edi- 
tions of  two  American  export  journals  intended  for  dis- 
tribution in  South  America,  he  should  concentrate  his 
appropriation  upon  a  mail  campaign.  From  one  of  the 
export  journals  and  from  other  sources  he  has  compiled 
a  list  of  various  classes  of  dealers  who  might  handle 
optical  goods  in  the  Argentine.  Upon  these  he  intends 
to  try  out  the  campaign  which  he  has  outlined,  consisting 
of  from  three  to  five  letters.  The  first  of  his  problems 
is  to  determine  the  order  in  which  to  present  information 
and  selling  points,  the  description  of  his  product,  state- 
ments as  to  quality,  exclusive  advantages,  prices,  profit 
on  resale,  and  dealer  helps.  He  believes  that,  so  long  as 
he  is  cognizant  of  the  necessity  of  accurate  translation, 
careful  checking  will  avoid  translation  errors.  There 
are  a  number  of  other  matters,  however,  in  connection 
with  the  make-up  of  the  letters  for  which  he  can  find  no 
very  clear  solution.  Pie  has  been  warned  that  the  for- 
eigner should  not  be  allowed  to  get  the  impression  that 
any  letter  received  is  a  form  letter.  The  question  arises 
as  to  whether  this  caution  should  lead  him  to  the  con- 
clusion that  the  results  obtained  from  a  much  smaller 
number  of  individually  written  letters  would  be  greater 
than  those  derived  from  a  larger  numl)er  of  form  letters, 
which  could  be  produced  at  a  much  smaller  unit  cost. 


342     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  87 

The  Rodgers  Machine  Manufacturing  Company— Catalogs  for 

Foreign  Trade 

Although  the  ooinplete  line  of  Rodgers  woodworking 
machines  has  been  sold  abroad  for  the  past  seventeen 
years,  the  Rodgers  Machine  Mannfacturing  Company  has 
never  developed  a  catalog  for  nse  in  foreign  trade.  The 
company's  tra^'elers  in  England,  Latin  America,  Japan, 
and  the  Philippines,  carry  with  them  photographs  of 
each  machine  and  a  full  set  of  blueprints ;  the  agents 
through  which  the  company  sells  its  entire  line  of  wood- 
working tools  are  similarly  equipped.  Reprints  of  the 
company's  advertisements  in  the  leading  engineering 
journals  have  been  sent  occasionally  to  prospective  cus- 
tomers, but,  for  the  most  part,  the  iirm  has  relied  upon 
blueprints  and  the  technical  knowledge  and  sales  ability 
of  its  travelers  to  develop  its  foreign  business.  As  com- 
petitors, however,  are  increasing  the  use  of  catalogs  in 
foreign  trade,  the  Rodgers  Company  is  considering  a 
change  of  policy. 

The  suggestion  was  made  that  the  company  should 
have  a  loose-leaf  catalog  so  that  as  new  models  were 
added  or  changes  made  in  the  line,  the  catalog  could  be 
kept  uj)  to  date  with  but  little  effort,  and  its  life  thus 
greatly  increased.  It  w^ould  be  possible  to  economize 
still  further  by  making  up  catalogs  of  loose  leaves  which 
w^ould  not  contain  a  description  of  the  entire  line,  but 
would  apply  only  to  a  customer's  particular  needs.  A 
well  bound,  attractive  catalog,  on  the  other  hand,  would 
not  so  likely  be  thrown  away  after  the  customer  had 
glanced  through  it ;  it  would  present  a  more  pleasing  ap- 
pearance; and  it  would  give  the  prospective  customer  a 
better  idea  of  the  complete  line.  The  company  has  found, 
however,  that  especially  in  South  America  the  inquiries 
for  catalogs  from  readers  of  its  advertisements  fre- 
quently come  from  catalog  collectors  who  are  not  pros- 
pective customers.     Should  the  company  decide  to  issue 


EXPORT  SALES  METHODS  343 

a  catalog,  therefore,  it  Avill  have  a  number  of  perplexing 
problems  to  solve. 

In  the  iirst  place  there  is  the  question  of  what 
languag-es  to  use.  Many  firms  publish  their  catalogs  in 
the  language  of  the  country  to  which  they  are  to  be  sent. 
This  method  requires  that  a  number  of  different  catalogs 
be  translated,  set  up,  and  printed,  in  order  to  cover  the 
languages  of  all  the  countries  in  which  the  product  is 
sold.  Furthermore,  although  Spanish  is  the  native 
language  of  Chile,  it  is  reported  that  the  catalogs  sent  to 
this  country  are  frequently  in  German,  because  of  the 
large  number  of  Germans  who  are  master  mechanics  in 
the  Chilean  mills.  In  Sao  Paulo,  Brazil,  and  in  the  Ar- 
gentine, Italian  is  frequently  spoken;  in  many  of  the 
other  countries  the  people  are  frequently  able  to  speak 
French.  This  situation  has  raised  the  question  as  to 
whether  or  not  the  company  should  restrict  the  publica- 
tion of  its  catalogs  for  the  foreign  field  to  English, 
French,  and  German,  or  include  Spanish,  Portuguese, 
Italian,  and  Japanese  as  well. 

Another  difficulty  is  that  of  translation.  After  the 
catalog  has  been  written  in  English  it  is  comparatively 
easy  to  secure  a  literary  translation  into  a  foreign  lan- 
guage. Frequently,  however,  ideas  expressed  in  English 
do  not  convey  the  same  meaning  when  translated  into  a 
foreign  tongue  for  the  benefit  of  people  whose  mode  of 
thought  is  different  from  ours.  That  a  machine  is  easily 
cleaned  and  is  free  from  the  danger  of  accidents  are 
selling  points  which  may  appeal  to  an  American  but 
which  may  not  make  so  strong  an  appeal  to  an  Italian 
or  Spaniard.  It  has  been  suggested  that  after  the  trans- 
lation has  been  made  in  the  United  States,  proofs  should 
be  sent  to  the  company 's  travelers  and  customers  abroad 
to  sechre  their  criticisms  and  suggestions  regarding 
changes,  but  such  a  step  would  mean  delay  in  publication 
and  would  add  considerably  to  the  expense. 

Still  another  question  which  has  arisen  is  whether  the 
catalog  should  be  printed  in  the  country  for  which  it  is 
intended  or  in  the  United  States.    Most  foreign  printers, 


341     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

particularly  those  in  Latin  America,  are  reported  as 
using  cheap  paper,  poor  inks,  and  as  being  inferior  work- 
men, although  they  will  frequently  do  the  work  at  a 
lower  rate  than  is  charged  in  the  United  States.  In 
order  to  encourage  the  native  printing  industry,  most 
foreign  countries  have  placed  a  heavy  duty  upon  im- 
ported advertising  and  catalogs.  Dealing  with  a  printer 
several  thousand  miles  away,  however,  has  its  disadvan- 
tages. The  tariffs  can  sometimes  be  circumvented  by 
shipping  the  catalogs  in  small  lots  on  which  no  customs 
duty  must  be  paid.  Furthermore,  in  Brazil,  it  is  stated 
that  catalogs  printed  in  Portuguese  are  admitted  at  com- 
paratively low  rates. 

In  order  to  link  the  name  of  the  local  dealer  or  agent 
with  the  name  of  the  Rodgers  Machine  Manufacturing 
Company,  the  dealer's  name  should  appear  on  the  cata- 
log. If  the  stamping  of  this  imprint  is  left  to  the  dealer, 
the  effect  of  a  high-class  catalog  may  be  destroyed 
through  the  slovenly  manner  in  which  this  work  is  done. 
On  the  other  hand,  if  the  dealer's  imprint  is  made  in  the 
States  a  number  of  catalogs  must  be  definitely  allotted 
to  each  dealer,  whether  or  not  they  are  efficiently  used. 

Because'  of  the  unfamiliarity  of  foreign  buyers  with 
American  machines,  it  is  necessary  that  the  catalog  con- 
tain a  more  detailed  description  than  is  frequently  neces- 
sary in  the  domestic  market.  In  addition  to  describing 
the  machine  and  the  work  it  will  do,  it  is  frequently  ad- 
visable to  give  the  floor  space  required,  the  speeds  and 
feeds,  the  horse-power  used,  the  gross  weight  pack  in 
pounds  and  kilos,  and  the  cubical  contents  jjack  in  cubic 
feet  and  cubic  meters.  As  the  company  has  always 
c[Uoted  its  prices  on  the  estimates  of  its  travelers  ap- 
proved by  the  export  manager  in  the  home  office,  no 
prices  will  appear  in  any  catalog.  In  the  past  the  com- 
pany has  left  all  sales  talk  to  be  handled  by  its  travelers 
and  agents  according  to  the  situation  in  the  customer's 
factory  and  the  temperament  of  the  man  with  whom  they 
must  deal;  but  if  this  policy  is  continued  in  the  catalog, 
the  com])aiiy  would  not  imi)ress  many  i)rospective  cus- 
tomers with  the  selling  points  of  Rodgers  machines. 


EXPORT  SALES  METHODS  345 

Problem  88 
Federated  Paper  Company — House  Organ* 

The  Federated  Paper  Company  exports  paper,  print- 
ing macliinery,  typewriters,  typewriter  supjilies,  inks, 
pastes,  and  similar  products.  This  company  deals  main- 
ly with  Latin  America,  operating*  branches  in  Argentina, 
Brazil,  Chile,  Peru,  Mexico,  and  Cuba,  and  having  exclu- 
sive agencies  in  most  of  the  other  South  American  coun- 
tries. Its  goods  are  sold  direct  to  printers,  publishing 
houses,  stationery  dealers,  and  large  consumers.  Al- 
though the  firm  has  advertised  extensively  in  magazines 
and  newsjDapers  having  a  circulation  in  Latin  America, 
it  has  not  found  that  this  form  of  publicity  has  been 
productive  of  the  anticipated  results.  The  class  of  peo- 
ple to  be  appealed  to  is  limited,  and  there  appears  to  be 
no  magazine  or  periodical  of  proper  standards  and  pres- 
tige circulating  among  paper  and  printing  houses  in  all 
these  countries.  The  Federated  Paper  Com^Dany  is  there- 
fore contemplating  establishing  a  house  organ  to  aid  in 
bringing  the  name  of  the  company  and  its  products  more 
effectively  before  its  customers. 

If  a  house  organ  is  established,  it  must  be  in  the  form 
of  a  high-class  magazine  in  order  to  appeal  to  the  print- 
ers, stationers,  and  other  merchants  who  are  connoisseurs 
of  the  printer's  art.  It  is  planned  to  have  the  magazine 
published  monthly  in  Spanish  and  printed  on  high-grade 
paper,  ^\'ith  a  durable  brown  art  ])aper  cover,  each  page 
being  about  8V2  hy  llMi  inches  in  size.  On  about  half 
of  the  thirty-six  pages,  which  it  is  expected  will  con- 
stitute the  magazine,  will  appear  the  advertising  of  the 
Federated  Paper  Company's  products;  in  the  other  half 
of  the  periodical  will  be  illustrated  articles  on  the  manu- 
facture of  paper  in  the  United  States,  other  semi-techni- 
cal subjects  of  interest  to  paper  merchants,  publishing 

*  Information  upon  the  use  of  the  house  organ  in  foreign  trade  may  be 
found  in  Cooper,  Foreign  Trade  Markets  a)ul  Methods,  Chap.  XIII; 
Printers'  Ink,  M.-in-li  9,  1922,  p.  137 — -"House  Magazines  to  Supplement 
Advertising  in  Latiu-Amcrica" ;  and  Exjiurt  Trade  and  Exporters'  lie- 
view,  Dec.   18,  1920,  p.  12— "Editing  an  Effective  House  Organ." 


346    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

companies,  and  business  houses  handling  typewriters, 
carbon  paper,  inks,  pastes,  fountain  pens,  and  similar  ar- 
ticles. Since  this  house  organ  is  intended  to  appeal  to 
the  customers  of  the  company  rather  than  to  the  firm's 
o^vn  employees,  it  will  not  be  filled  with  personal  and 
social  items  of  interest  only  to  the  company's  employees, 
as  is  the  case  in  the  ordinary  house  organ. 

The  publication  of  a  magazine  of  the  type  contemplated 
would  be  much  more  expensive  than  the  monthly  cir- 
cularization  of  the  trade  or  the  covering  of  the  trade 
with  personal  letters  at  stated  intervals.  Some  of  the 
officials  of  the  Federated  Paper  Company  are  skeptical 
as  to  the  advertising  value  of  a  house^  organ  as  compared 
with  other  forms  of  publicity.  They  are  of  the  opinion 
that  in  the  United  States,  at  least,  house  organs  find 
their  way  into  the  waste-baskets  fairly  frequently  and 
consequently  favor  advertising  through  circularization, 
motion  pictures,  and  similar  means. 

The  question  has  also  come  up  as  to  whether  or  not, 
if  a  house  organ  is  published,  it  should  be  distributed 
free  or  a  reasonable  subscription  price  charged.  Since 
no  advertising  would  be  published  except  that  of  the 
Federated  Paper  Company  itself,  one  of  the  most  profit- 
able sources  of  income  enjoyed  by  most  magazines  would 
be  lackiug.  By  charging  $1.50  a  year  or  15c  a  copy,  the 
company  would  not  be  able  to  come  anywhere  near  put- 
ting the  magazine  on  a  paying  basis,  but  this  charge 
might  make  the  magazine  assume  a  more  important  place 
in  the  eyes  of  its  readers,  although  such  a  policy  would 
most  assuredly  cut  down  the  numl)er  of  people  who 
would  receive  the  magazine  and  would  "saddle"  the 
company's  salesmen  with  the  prol)lem  of  securing  sub- 
scriptions to  the  company's  magazine  as  well  as  selling 
its  products. 

Should  the  Federated  Paper  Company  establish  a 
house  organ  to  appeal  to  its  customers  in  Latin  America? 
If  so,  should  it  be  distributed  free  or  should  a  nominal 
subscription  price  be  charged! 


EXPORT  SALES  METHODS  347 

Problem  89 
VoLK  Paint  Company — Methods  of  Sales  Stimulation 

It  has  frequently  been  said  that  much  of  the  business 
in  Latin  America  depends  upon  the  friendship  between 
the  buyer  and  the  seller.  The  foreign  salesmen  of  the 
Volk  Paint  Company  have  been  handicapped  in  this 
respect  by  their  ne^^^less  in  the  field  and  the  length  of 
time  which  usually  elapses  between  their  visits.  The 
firm's  foreign  representatives  say  that  local  agents  are 
able  to  cultivate  a  customer's  friendship  in  the  foreign 
business  and  that  salesmen  of  rival  lines  which  have  been 
longer  established  have  a  tremendous  advantage.  Even 
after  the  firm's  salesmen  become  better  acquainted  in  the 
territory,  they  sometimes  find  when  they  call  on  a  dealer 
that -his  order  for  the  season  has  already  been  given  to 
a  rival  firm. 

The  general  manager  has  intimated  that  in  his  opinion 
the  president  of  the  Yolk  Paint  Company  "has  gotten 
off  on  the  wrong  foot  entirely."  According  to  this  man's 
theory,  long  before  the  salesman  has  left  the  United 
States  steps  should  be  taken  to  prepare  the  market  for 
his  coming.  About  once  a  month,  while  the  salesman  is 
still  at  the  home  office,  he  should  write  personal  letters 
to  his  customers  to  keep  the  Volk  Company's  products 
in  their  minds  and  to  tell  them  that  he  is  coming  to  their 
country.  These  tactics  should  be  continued  until  just 
before  the  company's  representative  has  sailed.  Im- 
mediately upon  his  reaching  the  foreign  port  he  should 
send  another  letter  to  each  customer  announcing  his  ar- 
rival and  setting  a  date  on  which  he  expects  to  call  upon 
him.  In  this  manner  customers  are  kept  informed  of  the 
coming  visit  of  the  salesman  and  may  be  induced  to  with- 
hold placing  an  order  until  they  have  at  least  examined 
the  company's  new  line. 

The  general  manager  also  said  that  he  thought  stay- 
ing at  the  best  hotels  helped  to  establish  a  salesman  as 
a  social  equal  in  the  eyes  of  his  South  American  custom- 


348     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ers  much  more  than  such  a  thing  would  establish  him 
with  customers  in  the  domestic  field.  The  entertaining 
of  foreign  customers  by  the  salesman  is  also  an  important 
item,  although  this  custom  seems  to  have  died  out  to  a 
considerable  extent  in  certain  parts  of  the  United  States. 
Inquiries  as  to  the  Avelfare  of  a  customer's  family  are 
always  appreciated,  and  between  the  salesman's  visits 
Christmas  cards,  seasonal  remeimbrances,  leather  ad- 
dress books,  and  other  favors  help  to  build  up  the  bond 
of  friendship  between  the  two,  aid  in  keeping  the  sales- 
man in  the  customer's  mind,  and  make  the  securing  of 
orders  easier  and  more  certain. 

The  president  of  the  Volk  Paint  Company  has  taken 
violent  exception  to  any  such  plan  as  that  outlined  by  his 
general  manager.  Having  had  some  experience  as  a 
salesman  in  the  domestic  market  and  having  traveled  in 
South  America,  his  objections  must  not  be  cast  aside 
without  consideration.  In  the  first  place  it  is  his  plan  to 
keep  the  salesman  at  work  in  the  foreign  field  at  all 
times  except  when  he  is  home  on  vacation,  during  which 
period  a  short  visit  to  the  factory  will  be  required,  in 
order  to  keep  him  in  touch  Avitli  the  latest  developments. 
He  states  that  South  America  is  reported  as  being 
flooded  with  circulars  from  German  houses,  as  well  as 
from  firms  in  the  United  States,  and  it  is  his  opinion  that 
most  of  this  circularization  finds  its  way  into  the  waste 
basket  fully  as  cpiickly  as  it  docs  in  this  country.  If  the 
Volk  Paint  Company  is  to  solicit  business  by  correspond- 
ence, the  president  does  not  see  why  salesmen  should  be 
sent  from  the  United  States  when  order  takers  sent  by 
the  native  nianufacinrei-s'  agents,  operating  on  a  small 
commission  basis,  should  be  able  to  do  the  work  just  as 
well.  As  for  enteiiaining,  the  continual  sending  of  gifts, 
and  the  granting  of  favors,  the  president  says  that  the 
company  has  found  that  this  is  the  wrong  way  to  do 
business  in  the  domestic  market  and  abandoned  this 
policy  several  years  ago.  It  is  his  opinion  that  if  the 
salesmen  of  the  Volk  Paint  Company  are  so  inefficient 
that  it  is  necessarv  for  the  firm  to  buv  business  from 


EXPORT  SALES  METHODS  349 

its  South  American  customers,  the  company  should  either 
get  out  of  the  foreign  field  or  else  hire' more  efficient 
salesmen. 

When  pressed  for  an  answer  to  the  question  of 
how  the  company  should  stimulate  sales  in  South 
America,  the  president  said  that  he  favored  the  use  of 
moving  pictures  in  all  principal  cities.*  At  present  the 
motion  picture  is  the  popular  fad  among  Latin  Ameri- 
cans, and  where  the  percentage  of  ilhteracy  is  compara- 
tively high,  it  has  the  advantage  of  appeahng  to  everyone 
regardless  of  his  ability  to  read  an  advertisement  in  a 
newspaper  or  other  periodical.  He  also  favored  window 
demonstrations  put  on  by  salesmen  as  one  of  the  surest 
means  of  attracting  the  attention  of  a  large  numl)er  of 
potential  customers.  He  proposed  to  use  a  limited 
amount  of  newspaper  and  circular  advertising,  and  to 
this  end  advocated  that  all  salesmen  should  study  the 
popular  forms  of  advertising  in  their  territories  in  order 
to  assist  the  company  in  "putting  over"  a  successful 
advertising  campaign. 

What  methods  of  sales  stimulation  should  the  Volk 
Paint  Company  use  to  increase  its  orders  in  Latin 
America  ? 

*Iu   addition   to    Wyman,    Export    Merclwndising,    the    following    refer- 
ences may  be  consulted:  ^ 

Export  Trade  and  Exporters'  Review. 

April  19,  1919,  p.  18--The  Movies  as  a  Foreign  Selling  Force  " 
'^SsinS  T^^-''-'^-^  ^^°^^-  ^^^^*-  Aid^n^Sn 
''iLd^unu^''   ^-   '-"^''''^^^  P-t-es   as   a   Foreign  Advertising 

'tSi  %  ^I?n'  P-  J Oj-': Slide  Advertising  in  Latin  America." 
Sept.   3,    19J1,   p.   04-" Another  Feature   of  Slide   Advertising." 
rroceedings   of  annual   conventions,   Xational   Foreign   Trade   Council. 

"Plc£r^^/n  ^^^-f  Sr^^So^"-^-'   ^-   «^  the  Motion 
Printers'  Inlc. 

April  10,   1919,  p.  117— "American  Industrial   Films  Abroad." 
Journal  of  Commerce  and  Commercial  Bulletin. 

May   14,    1921-- Moving   Pictures   as   Business   Promoter" 


350    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  90 
The  Widlund  Company — Selling  or  Leasing  Textile  Machinery 

;The  Widlund  Company  has  always  sold  its  spinning 
machines  outright  to  foreign  textile  millsp  refusing  to 
lease  or  have  machines  operated  on  a  royalty  basis  as 
is  done  sometimes,  particularly  in  the  shoe  industry. 
(During  the  past  year,  however,  sales  have  become  more 
and  more  difficult  to  secure.  A  number  of  mills  in  South 
America,  Europe,  and  the  Far  East  have  little  money 
mth  which  to  buy  new  machinery.  Furthermore,  the 
rate  of  exchange  is  against  them  in  many  instances.  Sev- 
eral of  the  largest  miJLs,  therefore,  propose  that  they 
lease  new  machines  from  the  Widlund  Company  for  a 
period  of  two  years  at  a  fair  rate  to  be  agreed  upon  by 
the  two  companies! 

(The  Widlund  Company  has  frequently  sold  its  ma- 
chines on  90  or  120  days'  credit  and  occasionally  a  good 
mill  has  been  carried  on  open  account  for  a  full  year. 
Once  in  a  while  a  single  machine  has  been  installed  for 
demonstration  puriDosesJin  order  to  give  the  mill  mana- 
gers an  opportunity  to  satisfy  themselves  as  to  the  value 
and  efficiency  of  Widlund  machines.  (Such  a  machine  has 
sometimes  been  left  as  long  as  a  year  without  any  pay- 
ment being  made  by  the  textile  mill.  Leasing  machines 
for  a  two-year  period,  however,  would  establish  an  en- 
tirely new  precedent  jwliich  might  prove  troublesome  in 
the  future.  Furthermore, [these  mills  do  not  agree  to 
purchase  the  machines  at  the  end  of  the  two-year  period, 
since  their  managers  are  not  at  all  sure  that  exchange 
will  have  returned  to  normal  or  that  their  mills  will  be 
financially  able  to  meet  such  an  obligation  at  that  time. 
If  at  the  end  of  two  years  the  foreign  mill  should  refuse 
to  renew  the  lease  or  purchase  the  machines,  the  Wid- 
lund Company  would  have  a  number  of  used  machines  on 
its  hands  in  a  foreign  city  a^  greatly  depreciated  value 
owing  to  their  two  years'  use^, 

(Although  the  Widlund  Company  has  managed  to  keep 
the  nucleus  of  its  factory  organization  together  and  is 


EXPORT  SALES  METHODS 


351 


m  a  sound  financial  position,  by  sociirino-  more  hnsinoss 
It  oould  oporato  at  oroator  offici.'nev  and  lower  cost      Bv 
(oasiiio-  iliosc  machines  the  comi.any  would  bo  introduc- 
ing Its  product  into  a    numl)or  of  I'oroio-n  mills      T\u^ 
rates  of  exchange  are  so  much  against  many  of  the  mill 
owners  that  they  are  absoluteh-  unable   to  buy  at   the 
present  time,  but  by  leasing  high-grade  machines  they 
might  be  assisted  in  strengthening  the  financial  condition 
of  the  mills  so  that  they  could  purchase  the  equipment 
outright  at  the  end  of  two  years.     Furthermore,  Is    .! 
would  afford  the  Widlund  Company  a  source  of  income 
which  would  ottset  the  interest,  insurance,  warehouse  ex- 
pense, and  other  carrying  charges  on  these  machines 

^.hould  the  AVidlund  Company  accept  the  offer  of  the 
foreign  nulls  to  lease  machines  for  a  period  ,.f  two  years  ^ 

Problem  91 

The  Mellor  Milling  Company-Long-time  Credits 
VERSUS  Shipping  on  Consignment 

(The  Mellor  Milling  Company,  Avhich  has  built  up  exten- 
siye  sa  es  m  the  domestic  market  for  the  Eose  brand  of 
flour,  plans    o  deyelop  the  sale  of  its  product  in  England 
France,    Belgium,    Cuba,    Central    America,    Colomb  a 
Venezuela,   Ha.vaii,   and   the   Philippine   Islands.      S 
same  me  hod  of  selling  through  wholesalers  will  be  used 

o  tl  rL'T"  ir  '""""!f"^  "^  "^^^^"^§-  '^''  ^-^^  brand  one 
market    ^  l''-^  ^"f''  "^  ^"^"'  "^  ^^''  United  States 

maiket.  Since  it  is  evident  to  the  company,  however,  that 
It  cannot  expect  to  sell  a  new  brand  of  flour  on  terms 
of  cash  against  documents  in  New  York,  it  is  con  k™ 
iiig  whe  her  to  sell  on  long-time  credits  or  sliip  on    on- 

It  has  been  found  by  many  manufacturers  that  im- 
porters frequently  refuse  to  accept  shipments  of  a  new 
untned  product  except  on  a  consignn.ent  basis  and  he 
Me  lor  Company  can  scarcely  expect  different  treatment 
Soiling  on  consignment  the  companv  is  able  to  have 
stocks  in  the  foreign  field  when  il  is' ready  to  stai^'t 
advertising  campaign.     This  method  also   enabe     the 


352     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

company's  salesmen  to  call  on  the  retailers,  bakers  and 
restaurant  keepers  in  company  with  the  salesmen  of  the 
wholesaler.  By  cooperating  with  the  wholesaler  in  this 
manner,  his  good-will  is  secured  since  he  realizes  that 
the  company's  goal  is  not  to  overload  him  with  a  largo 
stock  of  "Rose"  flour  but  to  assist  him  in  securing  as 
many  sales  as  possible.  By  having  large  stocks  shipped 
on  a  consignment  basis,  the  Mellor  Company  insures  that 
prompt  service  can  be  furnished  immediately.  AVhen 
the  importer  becomes  convinced  that  there  is  a  demand 
for  the  Rose  brand,  it  will  then  be  possible  to  induce  him 
to  order  on  his  own  account. 

The  Mellor  Company  is  convinced  that  in  order  to  sell 
its  Rose  brand  flour  on  a  consignment  basis,  it  must 
investigate  competitive  conditions  and  consignment  pro- 
cedure in  the  different  countries.  It  must  make  a 
thorough  study  of  the  market  to  be  sure  there  is  a  poten- 
tial demand  for  this  flour  since  because  of  the  difference 
in  the  high  cost  of  freight  and  insurance  and  the  danger 
of  spoilage,  it  would  probably  be  impracticable  to  have 
shipments  returned.  It  will  also  be  necessary  that  the 
company  make  sure  that  the  importer  to  whom  a  con- 
signment is  sent  possesses  adequate  storage  facilities  or 
spoilage  is  likely  to  result.  It  will  also  be  necessary  to 
make  a  complete  investigation  as  to  the  character,  cap- 
ital, and  capability  of  the  consignee  in  order  to  be  sure 
that  he  be  both  able  and  willing  to  fulfill  his  obligations. 
In  order  to  control  stocks,  a  thorough  understanding 
must  be  reached  between  the  consignor  and  the  consignee 
as  to  the  obligations  of  each  party  to  the  agreement  and 
arrangements  must  be  made  with  the  company's  traveler 
or  with  a  local  public  accountant  to  check  and  verify  re- 
ports of  sales,  remittances,  and  claims  of  damaged  ship- 
ments. In  order  to  permit  the  conversion  of  the  value 
of  the  flour  into  foreign  currency  and  reconvert  this  value 
again  into  United  States  dollars,  it  will  also  be  necessary 
to  agree  in  advance  on  a  flxed  rate  of  exchange  which  can 
probably  be  adjusted  from  time  to  time  as  the  rates  of 
exchange  are  altered. 


EXPORT  SALES  METHODS  353 

Several  members  of  the  firm  objected  to  the  shipping 
ot   tiour  on  consignment   on   the   grounds   that  if   this 
amount  of  detail  is   required  before   consignments  can 
sately  be  made,  the  company  might  as  well  sell  on  the 
basis  of  long-tmie  credits.    These  men  state  that  the  com- 
pany must  assume  all  the  risk  if  the  flour  is  shipped  on 
a  consig-iiment  basis  and  that  import  houses  frequentlv 
overs  ock  on   consigned   goods.     Having  no   monev  in'- 
vested   in   the   shipment,   the   foreign   wholesaler  would 
have  no  inducement  to  push  its  sale.     These  men  favor 
therefore,  selling  the  Rose  brand  flour  on  long-time  credit 
terms  which  will  g^ ye  the  importer  ample  tiine  to  dispose 
of  his  stock  but  which  will  at  the  same  time  compel  him 
^o  push  their  sale  m  order  to  meet  his  obligations  when 


Problem  92 
The  Maddox  Export  Company-Dealing  on  Joint  Account 
The  Jraddox  Export  Company  carries  on  a  large  for- 

in  moT/nr'- "  '"1  'T'^  ^'''"'''''  °P"-««"S  bi-anches 
W  ""Portant  countries  of  tlie  world.  Altlaough 

It  bm.  and  sells  products  for  its  customers  through  the 
other  branches  or  the  home  office  of  the  company  each 
branch  ,s  operated  almost  as  a  separate  unit  Lo'u.  heM 
strict  V  to  account  for  its  share  of  the  profits.  The 
blanch  manager  can  hire  his  own  salesmen,  make  1  is  own 

o?rr:;:i,*vr''"  ^^"'»"  pi-— '"jeet'to  th:  z:z 

n  inv     nT;^        '  ''vl  *'•'  ^^^^''^'i^'^ed  P^^ey  of  the  com- 

adckwubv ';.,"!      '  '"  accordant  with  instructions 

mo  t        t.        ?  f  ""•  "'"^  "'  "'■"'•*  "P^'^t"  ^'^  branch 

i'usres.s'!  "  "■'"  "''  ''''"^'  "*  ""  independent 

thJl,™!,"Vwl  "V^''  U"'*^^  States  for  sale  abroad, 

Ic  oun'       The  f  °'f  °^r  f'-^-l^e^tly  deal  on  join 

account.     The  foreign  branch  estimates  the  amount  of 


851.    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

steel  it  can  probably  handle  during  a  given  period.  The 
home  organization  then  goes  into  the  market  at  a  time 
when  it  can  buy  the  steel  at  the  most  favorable  price  and 
purchases  this  amount.  In  a  changing  market  it  is  often 
possible  to  make  additional  profits  by  purchasing  steel 
at  the  right  time,  and  this  system  of  dealing  on  joint 
account  sometimes  enables  the  company  to  send  off  a 
shipment  at  an  earlier  date  than  would  otller^rise  be  pos- 
sible. The  parent  organization  and  its  branch  share  in 
the  losses  or  profits  made  on  the  joint  account  at  the  end 
of  the  period. 

The  chief  trouble  with  dealing  on  joint  account  is  that 
it  reduces  the  sense  of  responsibility  of  both  the  manager 
of  the  home  office  and  the  manager  of  the  foreign  branch, 
since  each  one  feels  that  the  responsibility  for  the  trans- 
action belongs  to  the  other.  Tn  case  of  losses,  particu- 
larly, dealing  on  joint  account  is  productive  of  disputes 
as  to  whether  the  transaction  should  have  been  put 
through  or  not  and  who  was  responsible  for  so  doing. 
There  are  also  frequent  arguments  as  to  which  expenses 
should  be  charged  to  the  branch,  which  expenses  charged 
to  the  home  office,  and  which  expenses  should  be  included 
in  deductions  from  the  joint  account  before  a  division  of 
profits  is  made. 

How  should  the  Maddox  Export  Company  remedy  the 
difficulties  arising  from  dealing  with  its  branches  on  joint 
account  ? 


Problem  93 

Cotton  Braid  Associates — Allocation  of  Orders 
AND  Credit  Losses  in  Export  Association 

Having  but  recently  been  organized,  the  Cotton  Braid 
Associates  are  confronted  by  many  perplexing  problems 
carrying  on  their  export  trade.  This  organization  is  com- 
posed of  a  number  of  manufacturers  uniting  as  a  cor- 
poration for  the  furthering  of  their  interests   abroad. 


EXPORT  SALES  METHODS  355 

Their  products  immberiiig  some  0,840  items  consist 
chiefiy  of  cotton  tape  of  all  kinds,  braid  for  decgrative 
purposes  and  for  binding  seams  on  women's  suits  and 
skirts,  various  forms  of  elastic,  suspender  and  garter 
webbing,  shoe  laces,  mercerized  ribbons,  thread,  and 
darning  cotton.  Since  these  Associates  manufacture  lines 
which  are  so  closely  allied  that  frequently  items  overlap, 
these  questions  have  arisen: 

How  shall  orders  received  by  the  Cotton  Braid  Asso- 
ciates for  merchandise  produced  liy  several  different 
manufacturers  be  allocated  I 

In  view  of  the  large  number  of  separate  items,  a  num- 
ber of  which  are  identical  or  similar  in  nature,  should  any 
attempt  be  made  to  standardize  and  consolidate  I  If  so, 
should  each  manufacturer  be  required  to  specialize  on 
the  product  he  is  best  adapted  to  produce,  or  should  he 
be  allowed  to  manufacture  any  article  he  sees  fit? 

Would  it  be  advisable  to  attempt  to  introduce  these 
products  in  foreign  lields  by  the  sample  method,  or  should 
descriptive  catalogs  be  used? 

If  one  manufacturer's  goods  are  ordered  in  preference 
to  another's,  should  this  manufacturer  be  compelled  to 
stand  the  loss  alone,  in  case  of  the  customer's  failure  to 
pay,  or  should  all  credit  losses  be  divided  equally  among 
all  the  Associates? 

The  Cotton  Braid  Associates  was  formed  for  the  pur- 
pose of  standardizing  selling  expenses,  developing  new 
markets,  and  increasing  the  volume  of  sales  of  each 
member.  Its  primary  object  is  to  present  and  deliver 
merchandise  to  foreign  customers  direct  from  the  sources 
of  production  at  the  lowest  possible  price.  The  complete 
line  of  goods  produced  by  the  Associates  is  so  varied  that 
a  foreign  customer  can  secure  practically  any  kind  of 
braid  or  allied  article  that  he  desires  from  this  one  selling 
organization.  The  corporation's  o^nl  salesmen  call  on 
the  trade,  but  it  is  planned  to  have  local  representatives 
in  each  large  city  who  will  be  in  a  position  to  take  orders 
at  any  time.  All  questions  of  credit  are  to  be  handled 
by  the  New  York  office  of  the  Cotton  Braid  Associates. 


356     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

It  has  been  proposed  that  where  several  lines  overlap 
all  orders  should  be  divided  equally  among  the  members 
of  the  corporation,  but  objections  have  been  raised  to 
this  plan  on  the  grounds  that  most  of  these  goods  are 
branded  and  that  if  a  customer  receives  one  brand  one 
time  he  is  likely  to  desire  the  same  brand  the  next  time. 
It  might  be  possible  to  scatter  the  small  orders  among  the 
different  maimfacturers,  but  a  large  order  must  be  di- 
vided in  order  to  give  each  his  proi)er  share.  It  is  prob- 
able that  a  customer  will  object  to  the  slightly  varying 
finishes  and  the  different  brands,  since  if  he  is  making  up 
a  lot  of  suits  according  to  one  pattern  lie  will  probably 
want  the  same  brand  of  findings  for  all. 

It  has  been  suggested  that  all  manufacturers  should 
pool  their  foreign  profits  on  the  duplicate  lines  and  that 
the  pool  should  bo  divided  equally  among  all  the  Asso- 
ciates. Some  of  the  members  of  the  corporation  have 
more  efficient  methods  and  operate  on  a  lower  cost  basis 
than  others.  There  is  no  uniform  method  of  accounting 
for  all  the  nulls,  so  that  an  item  such  as  interest  on  capi- 
tal owned  might  be  considered  as  a  cost  l)y  one  mill  and 
not  by  another.  Under  this  plan  a  mill  might  do  very 
little  export  work,  devoting  its  efforts  to  building  up  its 
domestic  trade,  yet  it  would  share  in  the  prosperity  of  all 
the  other  members. 

Leaving  the  allocation  of  orders  to  the  selection  of  the 
customer  has  also  been  proposed.  A  catalog  picturing 
the  goods  and  describing  their  uses  or  actual  samples  of 
the  goods  themselves  would  be  submitted  to  each  cus- 
tomer. The  salesmen  would  show  no  preference,  leaving 
it  to  the  customer  to  select  the  merchandise  he  prefers. 
In  this  manner  each  com^Dany  would  receive  only  those 
orders  to  which  it  was  justly  entitled  through  the  choice 
of  its  customers.  But  under  this  arrangement  a  sales- 
man would  become  a  mere  order-taker;  he  would  not  be 
allowed  to  push  the  sale  of  any  one  article  nor  use  ag- 
gressive selling  methods,  since  by  doing  so  he  would  be 
showing  partiality  to  one  manufacturer's  line.  It  is 
doubtful  if  a  really  efficient  salesman  could  be  induced  to 
adopt  such  passive  tactics. 


EXPORT  SALES  METHODS  357 

In  this  connection  it  has  been  sug-gested  that  since 
transportation  is  difficult,  particularly  in  many  parts  of 
Latin  America,  the  cost  of  having  each  salesman  carry  a 
sufficient  number  of  trunks  to  accommodate  3,840  sam- 
ples would  be  too  high.  It  is  suggested  that  illustrated 
catalogs  should  be  published  instead,  showing  each 
article  in  its  natural  colors,  accompanied  by  a  complete 
description.  It  would  be  possible  to  distribute  such  a 
catalog  to  large  customers,  thereby  helping  the  sales- 
men in  introducing  the  lines.  In  many  parts  of  Latin 
America,  however,  the  people  are  not  familiar  with  these 
articles  and  it  is  prob&ble  that  they  will  prefer  to  see 
samples  of  the  goods  and  feel  the  weight  of  the  different 
grades,  rather  than  order  from  reproductions. 

From  the  standpoint  of  the  foreign  sales  force  the  most 
desirable  thing  would  be  to  have  the  Associates  standard- 
ize their  products  so  that  there  would  be  no  duplicates  or 
possibilities  of  ill-will  aroused  among  the  members  of 
the  corporation  over  internal  competition.  By  having 
each  manufacturer  sj^ecialize  on  the  product  which  he  is 
best  fitted  to  produce,  the  maximum  amount  of  benefit 
to  foreign  trade  should  be  secured  by  each  individual 
firm.  It  is  probable  that  this  plan  would  be  difficult  to 
put  into  practice,  since  in  the  domestic  markets  these 
manufacturers  are  to  a  certain  extent  competitors.  Each 
firm  has  its  own  clientele  and  has  spent  considerable 
money  in  establishing  its  trade-mark  and  developing 
good-will.  Each  company  would  be  averse  to  giving 
up  the  manufacture  of  the  few  items  on  which  it  con- 
flicted with  other  Associates;  but  by  showing  each  firm 
that  its  sale  of  duplicate  items  was  so  small  as  scarcely 
to  pay  for  the  printing  of  its  description  in  the  catalog, 
it  might  be  possible  to  induce  it  to  follow  the  ad\ice  of 
the  export  manager  of  the  corporation  and  to  standardize 
and  consolidate  all  products  of  the  members  at  least  with 
regard  to  the  foi'eign  field. 

In  connection  with  the  allocation  of  bad  debts  the 
corporation  is  in  a  quandary.  It  might  be  arranged  to 
have  each  company  assume  the  credit  losses  arising  out 


358     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

of  its  own  orders;  but  although  each  customer  has  the 
right  to  select  his  o^\^l  merchandise,  the  merchandise  it- 
self can  scarcely  be  held  responsible  for  the  failure  of  the 
customer  to  pay  his  bill.  It  might  be  possible  to  charge 
off  all  credit  losses  equally  among  the  members  of  the 
corporation  since  each  holds  the  same  amount  of  stock. 
However,  if  one  Associate  has  competed  with  another 
for  an  order  and  has  lost,  he  can  scarcely  be  expected  to 
be  willing  to  assume  payment  of  a  part  of  the  credit  loss 
incurred  on  this  order. 


CHAPTER  VIII 


MANAGEMENT  OF  EXPORT  SALES 
FORCE 

THE  exporter,  who  plans  to  use  personal  salesman- 
ship in  developing  or  working  foreign  markets, 
soon  learns  that  he  must  meet  all  the  problems 
presented  by  his  domestic  sales  force  and  under  more 
difficult  conditions  than  in  the  domestic  market.  Difficult 
as  are  the  problems  of  selection  and  management  at 
home,  they  would  seem  insuperable  if  firms  employed 
salesmen  in  export  fields  as  frequently  as  in  domestic 
fields.  The  export  manager  must  first  of  all  decide  what 
type  of  salesman  he  wishes  to  employ.  The  usual  type  of 
export  salesman  is  one  who  operates  as  a  sales  represen- 
tative of  only  one  house,  but  there  are  a  number  of  so- 
called  "combination  salesmen"  who  represent  more  than 
one  concern.  Frequently  these  combination  salesmen 
handle  allied  lines;  and  in  so  far  as  they  handle  alhed 
lines  covering  a  fairly  narrow  range  of  non-competing 
products,  the  economy  in  their  employment  may  not  be 
more  than  offset  by  the  difficulty  of  the  salesmen  in  repre- 
senting the  interests  of  half  a  dozen  or  more  houses.  Ex- 
port salesmen,  who  can  satisfactorily  represent  a  single 
house,  are  hard  to  find.  Combination  salesmen  represent- 
ing a  number  of  houses  are  correspondingly  more  diffi- 
cult to  secure.  Usually  the  initiative  in  the  employment 
of  combination  salesmen  comes  from  the  salesman  him- 
self, who  finds  manufacturers  to  cooperate  in  his  employ- 
ment. On  such  a  basis  he  must,  therefore,  devote  consid- 
erable time  and  energy  to  selling  himself  to  the  various 
firms  and  in  keeping  each  firm  satisfied  that  he  is  oc- 
cupying a  sufficient  portion  of  his  time  in  the  representa- 
tion of  its  interests. 

359 


3G0     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Having  determined  upon  the  type  of  export  salesman, 
the  export  manager  must  attempt  to  form  some  definite 
basis  for  his  selection.  He  must  determine  the  qualifiea- 
tions  which  are  essential  and  the  additional  desirable 
qualifications.  He  will  find  few  candidates  who  satisfy 
his  desires.  He  must,  therefore,  determine  which  quali- 
fications he  can  dispense  with  or  can  develop  by  training. 
The  selection  of  salesmen  from  among  the  candidates 
secured  for  particular  positions  is  a  problem  which  tests 
the  judgment  of  the  export  manager  as  an  organizer.  As 
yet  very  few  aids  have  lieen  developed  for  the  export 
manager  in  tlie  selection  of  men,  and  most  export  sales- 
men in  the  successful  sales  force  have  been  selected  by 
a  process  of  "trial  and  error."  Since  candidates  for 
export  selling  positions  ordinarily  do  not  have  the  type 
of  experience  or  the  qualities  which  are  necessary  for 
greatest  success  with  a  particular  firm,  the  need  arises 
of  supplementing  such  qualities  and  qualifications  by 
training,  either  informally  under  the  tutelage  of  the  ex- 
port manager  or  by  means  of  a  formal  course  in  which 
candidates  are  grouped  under  a  developed  training- 
scheme.  When  trained  and  sent  into  the  field,  the  sales- 
man presents  the  whole  range  of  personnel  problems  re- 
garding compensation,  supervision  and  control,  all  of 
which  are  complicated  l)y  the  greater  field  of  action  which 
must  be  accorded  him  as  compared  to  the  domestic  sales- 
man. While  in  the  export  market  an  attempt  is  made 
to  compensate  for  the  difficulty  of  control  by  selecting  a 
higher  class  of  man  needing  less  control,  every  export 
manager  will  confess  that  more  detailed  knowledge  and 
closer  control  would  be  desirable  if  it  could  be  secured 
without  disadvantage.  The  problems  in  connection  with 
the  export  sales  force  are  indicated  in  more  detail  in 
the  following  outhne: 


EXPORT  SALES  FORCE  361 

A.  Selection  of  Export  Salesmen. 

1.  Qualifications. 

What  are  the  necessaiy  qualifications  for  the  export  sales- 
man ? 

Is  knowledge  of  foreign  languages  essential? 

Do  the  prerequisites  for  success  of  the  export  salesman 
differ  in  kind  or  degree  from  those  of  the  domestic  sales- 
man ? 

Do  the  desii-able  characteristics  of  a  combination  salesman 
coincide  with  those  of  a  salesman  carrying  the  line  of 
only  one  manufacturer  f 

How  do  the  qualifications  of  a  successful  salesman  differ 
according  to  the  type  of  customer  visited  .'  The  type  of 
product  sold?     The  market  visited? 

Should  the  salesman  he  chosen  because  of  his  knowledge 
of  the  line  or  of  the  market,  or  because  of  his  person- 
ality? In  what  degree  should  he  combine  these  three  de- 
sirable points? 

What  age,  inclinations,  family  ties,  education,  special 
trai]iing,  and  experience  are  most  to  be  desired  in  the 
candidate  for  a  given  position  ? 

2.  Methods  of  selection. 

Should  interview's,  successive  interviews,  application 
blanks,  psychological  tests,  or  a  combination  of  these  be 
used  in  the  selection  of  export  salesmen? 

Should  candidates  be  sought  in  foreign  branches,  in  col- 
leges, in  the  concern 's  domestic  sales  department  or  fac- 
tory, through  advertisements  in  periodicals,  through  the 
government  agencies,  or  from  other  sources  ? 

l.nder  what  circumstances  should  native  salesmen  of  for- 
eign countries  be  employed  ?    How  should  they  be  chosen  ? 

B.  Training  of  Export  Salesmen. 

1.  Advantages  and  disadvantages  of  specialized  training  for 
foreign  salesmen. 


i}62    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Is  training'  necessary  for  experienced  export  salesmen, 
provided  they  have  (a)  sold  similar  lines;  (b)  visited  the 
particidar  foreign  market;  (c)  been  engaged  in  selling 
different  lines,  but  reaching  the  same  classes  of  dealers? 

Under  what  conditions  is  it  advisable  to  establish  a  special 
school  for  training-  salesmen  for  foreign  trade  ? 

What  are  the  advantages  and  disadvantages  of  the  types 
of  training  required  by  representative  concerns? 

2.  Training  courses  for  export  salesmen. 

If  it  is  decided  to  establish  a  training  course,  in  what  sub- 
jects should  training  be  given  ? 

What  should  be  the  length  of  the  course  ? 

What  arrangements  should  be  made  as  to  payment  of  can- 
didates during  the  period  of  instruction? 

How  should  the  course  be  financed  ? 

Should  the  course  be  open  to  old  salesmen  as  well  as  to 

new  recruits  to  the  export  sales  force? 

Should  the  concern  attempt  to  bring  foreign  salesmen  to 
the  manufacturing  plant  or  not? 

Should  salesmen  be  trained  with  the  idea  that  they  will 
later  become  branch  managers,  export  managers,  etc.? 

C.  Compensation  of  Sales  Force. 

1.  Salary  plan. 

What  are  the  advantages  and  disadvantages  of  the  salary 
plan  of  compensation  for  export  salesmen  ? 

To  what  extent  is  its  use  dependent  upon  the  customs  of 
other  firms  in  the  same  line ;  upon  the  nature  of  the  busi- 
ness ;  upon  the  financial  resources  of  the  individual  con- 
cern ;  upon  the  character  of  the  export  salesman  ? 


o 


Commission  plans. 

How  does  the  length  of  time  that  the  salesman  has  been 
employed  by  the  concern  affect  the  advisability  of  the 
commission  form  of  payment? 


EXPORT  SALES  FORCE  363 

How  should  export  salesmen's  expenses  be  managed?  To 
what  extent  do  they  offer  greater  complications  than  in 
the  case  of  domestic  salesmen? 

3.  Combinations  of  salary  and  commission  plans — bonus  plans. 

To  what  extent  are  bonus,  profit-sharing,  and  other  plans 
successful  as  a  means  of  securing  the  best  efforts  of  ex- 
poi't  salesmen? 

D.  Management  and  Supervision  of  Sales  Force. 

1,  Equipment. 

How  should  the  export  salesman  be  equipped  with  regard 
to  portfolios,  samples,  models,  advertising  material,  cata- 
logues, personal  equipment? 

Should  the  export  salesman  be  equipped  with  written 
references  which  will  give  him  entree  into  homes  and 
clubs  as  well  as  into  business  establishments? 

Under  what  conditions  is  it  extremely  advisable  to  give 
him  a  power  of  attorney? 

What  equipment  should  be  provided  the  export  sales- 
man in  the  form  of  monej^,  trade  lists,  price  lists,  route 
lists,  and  the  like  ? 

2.  Supervision  and  control. 

(a)  Reports  of  salesmen — types  of  reports  and  methods  of 
handling. 

What  reports  should  be  required  of  export  salesmen  ? 

To  whom  should  reports  be  sent? 

How  sliould  they  be  handled  at  headquarters? 

Should  reports  contain  verification  of  names  on  prospect 
list,  additional  names,  credit  information,  general  in- 
formation on  business  conditions?     What  else? 

(b)  Expense  accounts — policy  and  methods  of  supervision. 

Should  the  export  salesman  be  held  to  definite  amounts 
or  should  expenditures  be  subsidiary  to  results? 


364     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

What  should  be  the  nature  and  frequency  of  expense  re- 
ports 1 

3.  Cooperation  of  sales  department  Avith  sales  force. 

(a)  Methods  of  cooperation  with  salesmen  in  the  field. 

What  methods  of  cooperation  between  the  home  office 
and  export  salesmen  are  useful  to  a  particular  concern? 

To  what  extent  are  house  organs  and  "pep"  letters  of 
value  in  the  case  of  the  foreign  traveler? 

What  are  the  essential  characteristics  of  successful  co- 
operation between   export  salesmen  and  the  house? 

(b)  Securing  cooperation  of  salesmen. 

How  can  the  cooperation  of  salesmen  in  regard  to  adver- 
tising be  secured? 

To  what  extent  can  Ihe  export  salesman  be  expected  to 
assist  the  export  department  in  the  distribution  of 
dealer  helps  ? 

How  can  the  export  salesman  aid  the  other  departnuMits 
at  the  plant — production,  financial,  credit,  etc.  ? 

4.  Stimulation    of    sales    force — methods    applicable    to    export 
selling. 

How  does  the  value  of  sales  contests  in  the  foreign  field 
compare  with  the  value  among  domestic  salesmen? 

What  are  the  difficulties  of  staging  contests  among  ex- 
port travelers? 

How  often  should  export  salesmen  visit  the  home  office? 

Is  it  advisable  to  specify  stated  intervals  when  export 
salesmen  shall  visit  the  plant  and  meet  other  export  and 
domestic  salesmen?  Is  it  advisable  to  liold  district  con- 
ventions in  the  foreign  field  ?  What  method  should  be 
used  to  bring  the  branch  managers  in  the  foreign  field 
in  contact  with  export  salesmen  ? 


EXPORT  SALES  FORCE  365 

.  Problem  94 

Eastern  Export  Managers'  Association — Qualifications  of 
Export  Salesmen* 

Many  export  managers  have  attempted  to  establish 
standard  qnalifications  which  would  aid  them  in  select- 
ing foreign  salesmen,  but  their  opinions  have  varied  so 
greatly  that  the  Eastern  Export  Managers'  Association 

*General  references  upon  employment  methods,  sueli  as  Metealf  and 
Tead,  Personal  Administration,  and  Shefferman,  Employment  Methods, 
while  applicable  are  of  little  help  in  the  problem  of  selecting  export 
salesmen.  Upon  the  qualifications  and  methods  of  selection  of  export 
salesmen  there  are  numerous  brief  references  such  as  Hough,  Practical 
Exporting,  pages  159,  160,  164  and  171;  Wyman,  Export  Merchandising  ; 
and   the   following  articles: 

Export   Trade   and   Exporters'   Beview. 

Jan.     8,  1921,  p.  10 — "English  and  Foreign  Sales." 
July  23,  1921,  p.  16 — "A  Salesman's  Observations  in  Mexico." 
Jan.     7,  1922,  p.     5 — "The  Man  They  Sent  to  Mexico." 
Jan.  14,  1922,  p.     n — ' '  The  Export  Traveler 's  Social  Side. ' ' 

Journal  of  Commerce  and  Commercial  Bulletin. 

Feb.   6,    1920 — "Wants   Americans   Trained   in   China." 
Proceedings   of  annual   conventions,   National   Foreign   Trade   Council. 

1920,   p.    597,    W.    P.    F.    Ayer — "The    Selection    and    Training    of 
Foreign   Salesmen." 

Printers'  Ink. 

May   16,   19] 8,   p.   65— "The   Salesman's   Qualifications   for  Chinese 

Trade. ' ' 
Nov.   7,    1918,   p.   63 — "The   New   Foreign   Eepresentative. " 
Apr.  10,  1919,  p.  169 — "Can  Your  Salesmen  Meet  the  Competition 

of  Those  from  England  and  France?" 
Sept.  2,   1920,   p.   125 — "First   Hand  Advice  to   Salesmen   in  Latin 

America, ' ' 

Sales  Management. 

April  1920,  p.  263 — "Before  You  Send  a  Man  to  England." 

The   World's  Markets. 

June   1919,  p.   30— "Americans  of  Foreign  Birth  as  Export   Sales- 
men. ' ' 
Mar.   1920,  p.  43— "The  Need  for  Export  Salesmen." 
Sept.  1920,  p.  35 — "Practical   Exporting." 
Oct.     1920,  p.  31 — "Practical  Exporting." 
June   1921,  p.  33— "How  to  Build  Foreign  Sales." 

The  methods  of  selection  used  for  domestic  salesmen  are  generally  used 
as  well  in  the  selection  of  foreign  salesmen,  but  as  yet  no  important 
attempt  has  been  made  to  use  psychological  tests  in  the  selection  of  men  for 
the  export  department.  A  study  of  the  application  of  psychological 
tests  to  the  selection  of  salesmen  has  been  carried  on  for  some  time  by 
the   Carnegie   Institute   of   Technology. 


3(56    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

has  appointed  a  committee  to  draw  up  a  set  of  standard 
qualifications.  This  committee  has  agreed  that  no  sales- 
men, whether  domestic  or  foreign,  can  approach  one  hun- 
dred per  cent  eflSciency  without : 

Poise 

Optimism 

Diplomacy 

Tact 

Good  business  judgment 

Ability  to  size  up  business  and  personal  relations 

and  conditions 
Ability  to  make  profits 
Good  habits 
Good  appearance 
Good  personality 

In  addition,  the  committee  has  agreed  that  the  follow- 
ing qualifications  should  be  possessed  by  a  foreign  rep- 
resentative in  order  that  he  may  secure  a  full  measure  of 
success  in  the  market  in  which  he  is  operating: 

Maturity  of  age  and  stability  of  character 
Inclination  to  reside  abroad 
Full  and  complete  knowledge  of  the  line 
General  knowledge  of  export  conditions  and 

practices 
Knowledge  of  the  language 
Adaptability  in  the  broadest  sense 
Credit  sense 
Character 

Many  export  managers,  however,  say  that  it  is  usually 
impossible  to  find  all  these  qualifications  fully  developed 
in  any  one  man.  They  have  asked  the  committee,  there- 
fore, to  list  these  qualifications  in  order  of  their  im- 
portance, giving  a  definite  value  or  weight  to  each.  The 
committee  has  made  the  following  explanations  of  the 
qualifications  it  advocates  for  foreign  salesmen : 

Maturity  of  Age.  A  man  of  twenty-eight  or  thirty 
years  usually  has  had  sufficient  experience  to  enable  him 


EXPORT  SALES  FORCE  367 

to  guard  himself  against  the  pitfalls  and  temptations  in 
most  foreign  lands.  Stability  of  character,  if  it  is  to 
come  at  all,  will  he  possessed  by  a  man  of  this  age.  It 
can  he  reasonably  expected  that  snch  a  man  will  be  able 
to  pass  by  the  seamy  side  of  foreign  cities  and  devote  his 
time  and  attention  to  the  furthering  of  the  sale  of  hi< 
product.  In  a  nunil)er  of  instances  which  the  connnittee 
investigated  it  was  found  that  young  men  who  had  been 
sent  to  Latin-American  countries  or  other  foreign  mar- 
kets without  family  ties  or  other  responsibilities  such  as 
they  wouhl  have  at  home,  had  committed  indiscretions 
which  they  would  not  have  done  had  they  been  able  to 
judge  results  both  to  themselves  and  to  the  company. 
The  committee  beheves  tliat  any  company  sending  a  man 
into  the  foreign  liekl  should  see  to  it  that  he  is  qualilied 
against  the  conditions  which  he  is  sure  to  meet,  by  mature 
judgment  whicli  can  seldom  be  found  in  men  of  k»ss  than 
twenty-eight  or  thirty  yeai's  of  age. 

Inclination  to  reside  abroad.  One  of  the  biggest  diffi- 
culties in  developing  a  foreign  sales  organization  com- 
posed of  Americans  is  the  tendency  of  American  young 
men  to  stay  in  the  United  States.  One  of  the  secrets  of 
the  success  of  German,  Scotch,  and  English  firms  in  the 
development  of  their  foreign  business  has  been  greater 
success  in  inducing  their  salesmen  to  reside  in  and 
make  their  homes  in  foreign  countries.  These  foreign 
salesmen  often  become  more  or  less  permanent  citizens 
of  the  country  of  their  adoption.  Unless  American  sales- 
men are  willing  to  reside  abroad  and  come  so  closelj^  in 
contact  with  the  foreign  merchants  that  American  ideals 
and  policies  become  known  to  them,  w^e  cannot  expect 
that  a  house  can  build  up  a  permanent  foreign  business 
w^th  the  most  favorable  results. 

Fidl  and  complete  hnoivledge  of  the  line.  In  the  United 
States  many  sales  representatives  are  not  so  familiar 
with  their  product  as  they  should  be,  but  they  are  able  to 
operate  successfully  because  of  their  proximity  to  head- 
quarters where  information  can  be  readily  secured  by 


368     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

mail  or  tolephoiio.  In  the  foroign  markets  a  representa- 
tive does  not  have  this  advantage,  and  he  should  be  able 
to  give  the  foreign  merchant  all  necessary  data  pertain- 
ing to  his  line  and  its  adaptability  to  the  foreign  country. 
In  addition,  he  should  be  thoroughly  acquainted  with  con- 
ditions in  the  United  States  industrially,  socially,  and 
politically,  so  that  he  may  become  a  real  ambassador  of 
the  American  manufacturer  and  a  visitor  who  is  respected 
and  welcomed  by  foreign  customers. 

Gpyieral  knowledge  of  export  conditions  and  practices. 
Foreign  business  is  quite  different  from  the  domestic 
business  in  many  ways  and  without  a  general  knowledge 
of  export  conditions  and  practices  a  foreign  salesman  will 
not  be  equipped  to  handle  the  business  satisfactorily  to 
either  his  customer  or  his  principal.  For  example,  in 
Chile,  it  is  required  by  law  that  all  packages  be  stencilled 
instead  of  being  marked  with  a  brush  or  otherwise. 
Unless  the  salesman  makes  this  notation  on  the  order, 
the  manufacturer  at  home  might  unknowingly  commit  a 
blunder  in  marking  export  shipments,  thus  entailing  a  fine 
upon  the  importer  which  would  in  turn  react  upon  the 
manufacturer. 

Knowledge  of  flic  language.  Although  a  knowledge  or 
the  language  of  the  country  in  w^hich  a  foreign  represent- 
ative is  to  operate  is  of  great  importance  and  will  un- 
doubtedly be  of  help  in  selling  merchandise,  the  com- 
mittee does  not  believe  that  men  should  be  sent  to  the 
foreign  field  mainly  because  of  this  knowledge.  In  many 
countries  the  importer  speaks  three  or  four  different  lan- 
guages. A  representative  going  to  South  America  should 
be  able  to  secure  sufficient  knowledge  of  Spanish  in  six 
months'  study  to  enable  him  to  become  sufficiently  pro- 
ficient, after  he  has  spent  six  months  in  South  America, 
to  converse  and  li'aiisact  liis  Imsiness. 

AdaptaJ)iUfg  in  its  broadest  sense.  A  man  must  have 
the  faculty  of  grasping  quickly  what  is  expected  of  him, 
no  matter  where  he  is  located.  He  must  be  able  to 
size  up  his  customers'  habits  and  to  drop  the  ways  of 


EXPORT  SALES  FORCE  369 

average  American  salesmen  and  conform  with  the  re- 
quirements existing  in  the  foreign  .land.  The  hustling 
American  salesman  Avho  goes  to  Rio  de  Janeiro  and 
expects  to  clean  up  the  city  in  three  or  four  days'  time 
in  the  same  manner  that  he  would  Cleveland  or  Chicago, 
is  frequently  unsuccessful;  whereas  a  competitor  who 
is  satisfied  to  go  to  the  same  }ilace  and  spend  sufficient 
time  in  social  intercourse  to  build  up  friendships  with 
the  native  buyers  succeeds  in  sending  home  more  busi- 
ness. 

Credit  sense.  The  man  who  can  definitely  and  accu- 
rately size  up  a  ci-cdit  risk  in  a  foreign  land  is  the  one 
who  will  be  the  most  successful  as  a  foreign  represent- 
ative. There  is  something  besides  the  actual  selling  of 
goods  abroad  and  that  is  to  secure  the  money  for  them 
after  they  are  sold.  In  the  United  States  it  is  possible  to 
secure  reliable  credit  records  on  customers.  Abroad, 
however,  because  of  the  different  conditions  under  which 
business  is  carried  on,  credit  reports  cannot  be  relied 
upon  to  the  same  extent.  A  foreign  salesman's  rec- 
ommendations, therefore,  based  on  good  credit  sense 
assist  in  making  a  clean  financial  slate  for  the  export 
department. 

Character.  ]\[any  men  who  have  traveled  abroad  have 
been  so  interested  in  the  immediate  order  to  be  secured 
that  they  have  sometimes  gone  so  far  as  to  misrepresent 
conditions.  The  man  with  high  character  and  ideals 
Avould  not  stoop  to  a  policy  of  this  kind,  which  is  detri- 
mental not  only  to  himself  and  his  principal  but  also  to 
the  great  mass  of  American  manufacturers. 

Should  any  other  qualifications  be  added  to  this  list! 

In  what  order  should  these  qualifications  be  listed  to 
show  their  importance,  and  what  method  of  weighing  each 
qualification  should  the  committee  adopt? 


370    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  95 
Jefferson  Automohile  Company — Selection  of  Salesmen 

The  Jefferson  Automobile  Company  is  attempting  to 
secure  better  methods  for  the  selection  of  its  foreign 
salesmen.  In  the  past  the  company  has  followed  no  def- 
inite policy ;  occasionally  men  have  been  selected  with  no 
social  training,  who  did  not  even  possess  the  proper  eve- 
ning clothes  to  permit  them  to  enter  into  the  social  activi- 
ties of  their  customers.  In  a  number  of  instances,  after 
time  and  money  have  been  spent  in  training  a  man  for 
export  work,  upon  actual  trial  he  has  proved  to  be  a  fail- 
ure. Not  only  does  the  company  ^visli  to  secure  high- 
grade  men,  but  it  also  wishes  to  secure  them  with  the 
least  expenditure  of  time  and  effort  on  the  part  of  the 
rest  of  the  executives. 

A  desirable  foreign  salesman  is  ordinarily  a  high- 
priced  man  who  cannot  be  employed  for  less  than  from 
$3000  to  $5000  a  year*  and  expenses,  depending  usually 
upon  whether  he  is  single  or  married.  Since  a  sales- 
man's expenses  frequently  equal  or  exceed  his  salary, 
a  foreign  salesman  costs  the  company  from  $6000  to  $10,- 
000  a  year  or  roughly  from  $20  to  $35  a  day.  In  the 
South  American  field,  where  the  Jefferson  Company 
transacts  most  of  its  foreign  business,  the  salesmen  must 
be  able  to  speak  Spanish  as  well  as  English,  irrespective 
of  the  fact  that  the  managers  of  most  foreign  houses  fre- 
quently speak  English.  Since  clerks  and  other  employees 
usually  transact"  all  business  in  Spanish,  salesmen  must 
be  able  to  converse  with  them  if  thej'  expect  to  secure  the 
maximum  amount  of  business.  The  records  of  the  Jeffer- 
son Company  show  that  if  a  foreign  salesman  does  not 

*The  expense  of  maintaining  salesmen  in  the  foreign  field  is  increased 
by  the  necessity  of  paying  license  fees  required  in  many  foreign  countries 
for  salesmen.  These  licenses  vary  from  small  sums  to  very  considerable 
amounts — to  as  much  as  $500  or  $1,000  per  year.  The  regulations  re- 
garding export  salesmen  prevailing  in  any  country  may  be  secured  cur- 
rently from  the  Bureau  of  Foreign  and  Domestic  Commerce.  The  types 
of  regulations  are  shown  in  Savay,  Principles  of  Foreign  Trade,  Chap.  XLI. 


EXPORT  SALES  FORCE  371 

speak  Spanish,  lie  is  of  but  little  use  to  the  company  for  at 
least  three  years ;  even  if  he  does  speak  this  language  but 
has  not  been  in  the  district  before,  he  cannot  be  expected 
to  produce  orders  on  a  profitable  basis  for  a  year  and  a 
half.  For  these  reasons  the  company's  salesmen  are 
usually  sent  abroad  under  contract  for  never  less  than 
two  nor  more  than  three  years. 

The  company  plans  to  give  all  foreign  salesmen  six 
months'  instruction  in  the  methods  of  manufacturing  and 
selling  the  product  as  well  as  in  the  policies  of  the  com- 
pany. Each  man  is  also  to  study  the  language  of  the 
country  to  which  he  expects  to  be  sent.  It  has  been 
suggested,  however,  that  although  this  course  might  be 
of  help  to  the  company  in  educating  its  foreign  represent- 
atives and  in  weeding  out  undesirable  salesmen  who 
might  have  shpped  by  any  preliminary  method  of  selec- 
tion, the  company  has  no  means  of  determining  a  man's 
social  qualifications,  notwithstanding  the  fact  that  they 
constitute  one  of  the  most  important  aids  a  salesman 
sometimes  has  at  his  disposal.  In  Latin  America  a  sales- 
man is  frequently  entertained  in  the  homes  of  his  cus- 
tomers and  it  is  therefore  advisable  that  the  export  man- 
ager and  president  of  the  firm  entertain  him  in  their 
homes  in  order  to  judge  of  his  social  qualifications.  In 
case  a  salesman  is  married  and  expects  to  take  his  wife 
abroad,  she  too  should  be  invited  in  order  to  ascertain 
whether  or  not  she  is  socially  equipped  to  assist  her 
husband  in  making  the  most  of  his  possibilities  in  the 
Latin  American  field.  Although  it  is  obvious  that  all 
applicants  cannot  be  entertained  indiscriminately,  yet  if 
a  man's  social  qualifications  are  not  determined  before 
he  is  placed  in  the  training  course,  much  time  may  be 
wasted  in  educating  a  man  who  is  not  a  desirable  repre- 
sentative of  the  Jefferson  Company. 

When  vacancies  occur  in  its  domestic  sales  force  the 
Jefferson  Company  advertises  in  the  local  papers  in 
whatever  city  the  vacancy  has  occurred.  These  adver- 
tisements explain  the  nature  of  the  position  in  detail  in 
order  to  give  the  applicant  an  idea  of  what  is  expected 


372     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

of  hini  and  also  to  save  the  time  of  the  sales  manager 
by  preventing  the  sending  in  of  applications  from  men 
who  do  not  fully  understand  the  nature  and  duties  of  the 
position.  These  advertisements  do  not  give  the  com- 
pany's address,  but  advise  the  applicant  to  send  a  postal 
to  the  newspaper  office  for  an  application  blank.  Many 
undesirables  are  frequently  eliminated  through  their 
unwillingness  to  go  to  the  trouble  of  filling  out  such  a 
blank;  others  are  weeded  out  after  their  application 
blanks  have  been  received  by  the  company.  In  this  man- 
ner the  number  of  men  to  be  interviewed  by  the  sales 
manager  for  final  selection  is  reduced  to  three  or  four 
for  each  vacancy.  The  chief  objection  made  to  this 
method  is  that  it  is  haphazard  since,  except  during  a 
depression,  high-grade  men  suitable  for  foreign  work 
are  not  inclined  to  apply  for  positions  through  "want 
ads"  appearing  in  local  papers. 

The  policy  followed  by  some  companies  is  to  select 
young  men  to  till  the  clerical  and  routine  positions  with 
a  view  to  their  future  possibilities  as  foreign  salesmen. 
These  men  must  have  had  at  least  two  or  three  years 
of  high  school  training  and  must  be  citizens  of  the  United 
States.  The  several  years  of  training  secured  in  working 
about  the  plant  or  office  of  the  company  before  the  men 
are  selected  for  the  foreign  field  is  highly  desirable.  The 
right  type  of  young  men,  however,  is  difficult  to  secure 
since  much  of  the  clerical  work  is  performed  by.  girls 
who  can  be  retained  at  lower  cost ;  and  many  young  men 
with  a  high  school  education  refuse  to  work  in  factories, 
preferring  to  become  office  workers  or  salesmen.  Fur- 
thermore, when  the  demand  arieps*  for  men  to  be  sent 
abroad  there  is  usually  a  demand  for  men  for  other  parts 
of  the  organization  because  of  the  increased  amount 
of  business,  and  it  has  sometimes  been  difficult  for  the 
export  department  to  secure  the  men  it  needed. 

During  the  past  year  the  export  manager  of  the  Jeffer- 
son Company  has  made  a  number  of  trips  to  colleges 
and  other  institutions  to  secure  young  men  ^^dth  a  higher 
educational  training  for  his  organization.  Although  these 


EXPORT  SALES  FORCE  373 

trips  have  consumed  a  great  deal  of  the  export  manager's 
time,  his  interviews  mth  prospective  salesmen  have  fre- 
quently been  hasty  and  have  not  always  resulted  in  the 
hiring  of  satisfactory  employees.  A  number  of  colleges 
and  universities,  however,  are  giving  instruction  in  the 
phases  of  foreign  trade  and  it  is  possible  that  desirable 
material  could  be  secured  from  this  source  if  proper 
methods  of  selection  are  utilized. 

Most  young  salesmen,  whether  coming  from  colleges 
or  from  the  company's  o^\^l  organization,  are  quick  to 
learn,  have  but  little  hesitancy  in  serving  their  appren- 
ticeship both  in  the  factory  and  on  the  road,  have  few 
preconceived  ideas  of  how  the  business  should  be  con- 
ducted, and  can  be  trained  to  follow  the  methods  laid 
down  by  the  company.  They  are  usually  full  of  enthusi- 
asm, filled  with  the  love  for  adventure,  are  not  over- 
critical,  become  acclimated  easily,  and  sometimes  like  the 
foreign  country  so  well  that  they  are  willing  to  reside 
there  permanently.  On  the  other  hand  many  young 
salesmen  are  impulsive  and  lack  mature  judgment;  they 
sometimes  become  discouraged  because  of  the  bad  food 
and  poor  conditions  under  which  they  frequently  must 
live  and  the  difiiculties  and  hard  knocks  incident  to  intro- 
ducing a  new  line  in  a  foreign  field.  Occasionally  they 
lack  the  character  to  resist  the  bribes  offered  by  rival 
companies  if  they  will  keep  away  from  important  dealers, 
or  because  of  their  lack  of  understanding  of  the  for- 
eigner's point  of  view  they  may  lose  customers. 

Because  of  their  immature  judgment  and  lack  of  home 
ties  young  men  are  sometimes  prone  to  fall  prey  to  the 
dissipations  prevalent  in  a  foreign  country.  Being 
forced  to  spend  a  holiday  or  week-end  in  a  small  fpreign 
city  the  only  companionship  open  to  them  is  at  the  gam- 
bling table  or  with  disreputable  women  who  frequent  the 
hotels  and  cafes.  As  the  export  manager  of  the  Jeffer- 
son Company  explained  the  situation:  "It  is  not  our 
purpose  to  censor  their  morals  or  interfere  with  the 
personal  freedom  of  our  salesmen;  it  is  simply  a  matter 
of  business.     If  one  of  our  foreign  salesmen  takes  to 


37i     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

,i»-ambliiig,  his  losses  are  frequently  reflected  in  a  padded 
expense  account;. if  he  accepts  the  other  forms  of  dissi- 
pation open  to  him,  his  effectiveness  as  a  salesman  is 
lessened,  and  in  either  case  he  must  usually  be  replaced." 
Another  method  is  to  select  men  about  thirty -five  years 
of  age,  who  possess  more  mature  judgment  and  who  are 
better  able  to  pass  by  the  pitfalls  and  temptations  offered 
by  the  seamy  side  of  life  in  foreign  cities.  These  men  are 
more  seasoned  and  dependable  and  are  not  so  prone  to 
discouragement ;  their  character  is  more  fully  developed ; 
they  are  less  impatient  and  possess  more  tact  and  expe- 
rience in  dealing  with  other  j^eople.  A  man  who  possesses 
these  qualifications  to  a  marked  degree,  however,  usually 
has  a  good  position  at  thirty-five  which  he  is  loath  to 
leave ;  he  has  often  developed  preconceived  ideas  of  how 
to  carry  on  his  foreign  business  and  might  object  to  fol- 
lowing all  of  the  policies  of  the  company.  Unless  he 
is  already  able  to  speak  the  language,  it  is  difficult  for 
him  to  learn  to  speak  it  without  a  noticeable  accent.  Fre- 
quently it  is  difficult  for  him  to  become  acclimated  or 
accustomed  to  foreign  methods  of  doing  business.  Since 
men  of  this  age  ordinarily  are  married  or  have  home  ties 
that  make  them  unwilling  to  reside  permanently  abroad, 
it  might  be  difficult  for  the  company  to  Imild  up  a  per- 
manent sales  force  with  older  men. 


Problem  96 

The  Hi.sH  Oir.  Company — Application  Blanks  for  Export 
Salesmen  ■"■ 

When  Mr.  Xash  was  first  eni[)l()yt'd  as  foreign  sales 
managei-  by  the  Rush  Oil  Ccmipany  he  was  already  past 
middle  age  and  did  not  look  with  favor  on  new  methods. 
He  fre(|uently  made  the  statement  that  salesmen  were 

*Aii  iiitcicstiii};-  sories  of  oxporimciits  in  the  appraisal  of  application 
blanks  filled  out  l)y  candidates  for  salesmen's  positions  is  described  in  au 
article  in  tlie  Jan.  19l2'J  issne  of  Sales  Manafjomoit,  entitled  "A  Grading 
System   for  I'ickinjj  Men." 


EXPORT  SALES  FORCE  375 

bom  and  not  made  and  that  he  could  tell  in  five  minutes 
whether  or  not  a  man  would  make  good  in  the  foreign 
field;  consequently  he  has  interviewed  and  selected  his 
salesmen  personally,  refusing  to  delegate  this  function. 
Because  of  his  strong  personality,  thorough  knowledge 
of  the  foreign  field,  and  shrewd  judgment,  Mr.  Nash  has 
made  a  success  as  export  manager. 

The  Rush  Oil  Company  has  salesmen  in  most  of  the 
countries  of  Europe  and  South  America,  and  in  Japan, 
China,  and  India  in  the  Far  East.  This  firm  sells  dif- 
ferent grades  of  mineral  oil  for  lubrication  purposes 
both  in  the  United  States  and  abroad.  Its  product  varies 
from  the  fine  oils  used  in  watches  and  delicate  labora- 
tory equipment  to  the  heaviest  cylinder  oils  used  in  large 
gasoline  engines ;  consequently  in  selecting  salesmen  Mr. 
Nash  has  usually  chosen  those  who  have  some  knowledge 
of  machinery  and  the  practical  use  of  lubricating  oils. 
As  a  rule  preference  has  been  given  to  native  Americans 
because  the  directors  of  the  company  prefer  to  have 
Americans  represent  them  abroad.  Single  men  have 
usually  been  selected  rather  than  married  men  because 
they  are  able  to  live  in  a  foreign  country  on  a  lower  salary 
than  a  man  with  a  family.  Mr.  Nash  has  also  been  par- 
ticular to  employ  only  men  in  good  health,  since  when  he 
has  not  insisted  on  this  point  he  has  usually  found  that 
the  applicant  could  not  stand  the  rigors  and  hardships 
incident  to  travelling  abroad.  A  sick  salesman  in  the  for- 
eign field  is  a  heavy  expense  to  a  company  with  no  returns 
being  received  for  the  money  expended.  Mr.  Nash  has 
also  chosen,  as  a  rule,  the  men  with  a  college  education 
particularly  if  they  have  studied  economics  or  engineer- 
ing, or  other  practical  courses  which  might  be  of  value 
in  a  commercial  way.  Men  without  a  college  training, 
who  have  spent  some  time  in  a  commercial  or  trade 
school,  have  also  been  considered  desirable.  Since  each 
salesman  is  employed  in  the  New  York  office  of  the  Rush 
Oil  Company  for  from  six  months  to  a  year  before  being 
sent  abroad,  a  knowledge  of  typewriting  and  office  rou- 
tine is  frequently  valuable.    During  this  time  it  is  possi- 


376    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ble  for  him  to  secure  a  smattering  of  a  foreign  language, 
but  as  a  rule  the  company  prefers  to  hire  men  who 
already  are  more  or  less  familiar  with  the  language  of 
the  country  to  which  they  are  being  sent. 

Mr.  Nash  is  about  to  retire  because  of  ill  health,  and  his 
assistant,  Mr.  Holden,  is  to  succeed  him.  Mr.  Holden  is 
not  satisfied  with  the  present  method  of  hiring  salesmen, 
and  he  has  decided  to  introduce  the  use  of  application 
blanks  in  order  to  standardize  the  information  of  each 
applicant,  to  save  time  by  eliminating  the  asking  of  rout- 
ing questions  in  interviews,  and  to  cut  down  the  number 
of  interviews  by  rejecting  the  more  undesirable  appli- 
cants after  making  a  study  of  their  application  blanks. 
In  accordance  with  his  request  the  following  application 
blanks  have  been  submitted  by  two  members  of  the  export 
staff,  but  Mr.  Holden  is  not  sure  which  one  should  be 
chosen  as  best  fitted  to  the  needs  of  the  Rush  Oil  Com- 
pany or  what  modifications,  if  any,  should  be  made  in  the 
blank  which  is  chosen. 

A.  APPLICATION  FOR  EMPLOYMENT 

Applicants  are  requested  to  read  the  entire  blank  through  first 
before  filling  in,  as  answers  should  be  complete  and  in  own  hand 
writing. 

A  satisfactory  introduction  or  identification  must  be  presented 
by  all  applicants. 

A  small  unmounted  photograph,  if  available  or  easily  secured, 
will  prove  helpful  in  considering  the  application. 

The  privilege  of  filing  an  application  does  not  imply  eventual 
appointment  but  that  careful  thought  will  be  given  to  it  when 
a  vacanc}^  occurs. 

All  persons  appointed  to  positions  in  this  company  are  on  trial 
for  a  period  of  three  months,  and  if  at  any  time  during  that  pe- 
riod it  is  found  that  the  employee  is  not  adapted  to  the  work  of 
the  company  or  is  not  likely  to  prove  useful,  the  engagement 
may  be  terminated  without  further  reason  or  prejudice  to  the 
employee's  reputation. 

Date . 

Name  in  Full 

Residence  Address Telephone-^ 

(Street  and  Number) 
City  or  l*ost  Office State 


EXPORT  SALES  FORCE  377 


Permanent  Address   (if  any). 
Introduced  by. 


(Preferably  someone  known  to  the  firm) 
If  not  introduced,  state  how  you  eame  to  apply 


Position  desired 


(Be  specific,  and  if  possible  state  ultimate  aim) 


What  is  the  lowest  salary  you  will  accept? State  what 

special  qualifications  or  talents  you  possess,  if  any.  which  you 
think  would  fit  you  for  the  business  carried  on  by  this  Concern : 


(Continue  over) 
This  is  not  to  he  filled  in  hjj  Applicant. 

Enga<?ed  by Date To  begin  work  on 

On  recommendation  of At  salary  of 

General  appearance Personality 


Character  __Energy,    Initiative. 

Judgment,  good  sense Promise  of  Gi'owth- 

General  fitness 

Additional  remarks  and  impressions 


Personal  Data. 

Date  of  Birth Place  of  Birth- 
Height Weight Health 


(State  if  excellent,  fair  or  poor) 

Any  physical  defects,  sight,  hearing,  etc? 

Have  you  been  seriously  ill  within  the  last  two  years  .* If  so, 

with    what — — ■ — - 

Are  you  a  citizen  ? If  not,  what  Nationality  are  you  .' 

How  long  have  you  been  in  this  country  f 


If  father,  mother,  brother  or  other  near  relatives  are  living,  give 
below  their  names,  addresses  and  occupations 

Relation  Name  Address  Occupation 


378     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Are  you  related  to  any  officer,  director  or  employee  of  this  com- 
pany ? Tf  so,  to  whom. — . 

Are  you  married  ? If  so,  how  many  in  the  family  ? 

How  many  persons  are  dependent  upon  you? 

If  single,  do  you  live  with  your  parents  ? 


If  boarding,  how  much  per  week  does  it  cost  you  1 
Do  you  live  within  your  income  f 


Have  you  any  income  other  than  salary? — If  so,  how  much? 

Are  vou  in  debt  ? If  so,  how  much  and  for  what  reason 


Are  you  a  member  of  any  religious  denomination?. 

If  not  a  member,  do  you  attend  any  church? 

Do  you  use  liquors  of  any  sort?. 


Are  you  a  member  of  any  Military  Organization? 

If  so,  give  the  name . 

Educational  Data. 

Give  below  the  names  of  the  educational  institutions  you  have 

attended,  together  with  dates. 


From            To 

1 

Name  of  School 

City 

1 

State        Name  Course  you  took  Diploma  or  Degree  Obtained 


If  you  did  not  graduate,  why  did  you  leave  your  last  school  ?_ 
What  is  the  highest  record  you  attained  ? 


Were  you  ever  suspended  or  expelled  from  school  ?_ 
If  so,  for  what  reason 


Mention  the  subjects  in  which  you  specialized. 


Do    you    know    Stenography 


Speed- 


ing '/. 


Speed- 
Invoicing  ?. 


Typewrit- 

Accounting  ? 


Bookkeeping  ? 

Have  you  studied  any  other  com- 


mercial subjects?. 


EXPORT  SALES  FORCE  379 

What  languages  do  you  speak,  write  (or  read) 

What  interests  other  than  the  regular  course  did  you  have  while 

at  school  or  college? — — _ 

Have  you  studied  abroad  ? Where 


Have  you  traveled  abroad? Where . 

Give  the  names  and  addresses  of  two  instructors  who  know 
best  about  your  work___^ — — 

References. 
Give  the  names  and  addresses  of  three  persons  not  related  to  you 
with  whom  you  are  acquainted  and  to  whom  you  can  refer  as  to 
your  character,  habits  and  ability : 

How  long  has  What  position 

Name       Address  reference  known  you      does  person  occupy 


If  this  is  your  first  position,  give  name  and  present  address  of 

your  last  instructor  or  your  clergyman _ 

Experience. 

What  experience  have  you  had  in  business  ? 


What  special  kind  of  work  have  you  done  ? 

Where  and  by  whom  are  you  now  employed 


Why  do  you  desire  to  make  a  change  ■ 

Shall  we  write  to  your  present  employer  ? 

(Consider  this  question  carefully,  as  it  may  cost  you  your  present 
position  if  j^our  emploj^er  knew  you  were  seeking  employment 
elsewhere.) 

What  salary  do  you  receive? . 

If  not  now  employed,  why  did  you  leave  your  last  employer? 

(state  reasons  fully) 

Were  you  ever  discharged  from  any  position  ? If  so,  for 

what  reasons?  (state  particulars) 


State  periods  and  by  whom  you  have  been  employed  since  leaving 
school,  give  full  account,  starting  with  last  position  first.  In  last 
column  state  salary  with  which  you  started  and  salary  you  re- 
ceived when  you  left. 


380     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Name      of      Em-  Position     Salary 

ployer.    ( Give  you  held  ;  at  start 

Company  or  firm  Line   of     under     and  when 

From  To  name   in   full).      Address  Business     -whom       leaving 


(Last  position) 


(Keason  for  leaving  above  firm) 


(Next  to  last  position' 


(Reason  for  leaving) 


(Position  before  that) 


(Reason  for  leaving) 


Reason  for  leaving) 


Reason  for  leaving) 


If  any  great  length  of  time  elapsed  between  dates  of  employment, 
state  what  you  were  doing 

Would  you  accept  a  position  in  one  of  our  foreign  branches  if 

given   the   opportunity? 

Give  full  detailed,  consecutive  statement  covering  your  duties 
in  the  above  mentioned  positions ;  also  further  remarks  as  to 
your  experience,  capabilities  and  anv  position  you  are  qualified 
to  fill '. 


I  hereby  affirm  that  my  answers  to  the  foregoing  questions  are 
true  and  correct,  and  that  I  have  not  knowingly  withheld  any 
fact  or  circumstance  that  would,  if  disclosed,  affect  my  appli<?a- 
tion  unfavorably.    In  the  event  of  my  appointment  to  a  position 


EXPORT  SALES  FORCE  381 

I  promise  obedieiice  to  my  superiors,  to  cheerfully  comply  with 
all  established  rules  and  regulations,  and  to  devote  my  entire 
time,  energy  and  ability  to  the  exclusive  service  of  the  Com- 
pany. Should  I  desire  to  leave  the  Company,  I  promise  to  file 
my  resignation  tivo  weeks  prior  to  the  date  it  is  to  go  into  effect. 

Applicant. 


B.  APPLICATION  FOR  POSITION 

Questions  to  be  answered  by  applicant  in  own  handwriting. 

Date 

Personal 

1.  Name    in   full 


2.  Present   Address- 


3.  Born  at on 18 Age_ 

4.  Are  you  a  citizen  of  the  United  States? 


5.  lleligion 

(a)  Are  you  a  regular  church  attendant?. 

(b)  If  so,  state  where 


6.  State  whether  Single,  Married,  Widower  or  Divorced- 

7.  Dependents 

(a)   How  many  dependent  upon  you?_ 


(b)   State  relationship,  and  give  ages  of  children,  if  any 

8.  Nationality  of  parents 

(a)   Father (b)   Mother __^ 

9.  Health 

(a)  Are  you  at  present  in  good  health?. 


(b)  Have  you  during  recent  years  had  any  protracted 
illness '? 

(c)  If  so,  give  nature  of  same 


10.  Do  you  know,  or  are  you  related  to  any  Director  or  Em- 
ployee of  this  Company  ? 

(a)   If  so,  give  nanip 


11.  Are  you  Avilling  to  go  into  foreign  service?. 


382     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Education 

1.  High   School 

''a)  Name (b)  Place . 


( c )   D id  you  graduate  ? ( d )  What  year  1 

2.  College 

(a)   Name (b)  Place_ 


(c)   Did  you  graduate? (d)  What  year 

(e)   If  graduated,  what  degree  ?_ 


(f )   Honors,  special  degrees  or  honoraiy  societies. 


(g)   In  what  subjects  did  you  specialize?. 


(h)   Did  you  take  part  in  athletics  or  other  college  ac- 
tivities?   , 


^i)   If  so,  what?- 


;{.   Commercial  or  Trade  School 
(a)   Name 


(b)   What  subjects  ?- 


4.  Special  educational  work. 


5.  Travel 


6.  What  foreign  languages  do  you  speak  or  write?. 


Business. 

1.  Give  information  regarding  previous  connections  as  follows: 
(a)   Name  of  concern Place 


.From to Salary  received. 

Exact  nature  of  work 


Reason  for  leaving_ . — . 

(b)  Name  of  concern Place 

From to Salary  received- 
Exact  nature  of  work 


Eeason  for  leaving 

(c)  Name  of  concern Place. 


EXPORT  SALES  FORCE  383 


From to Salary  recoivfiL 

Kxact  nature  of  work 


Reason  for  leavino- 

(d)   Namo  of  eonocrn Place 

From to Salary  received- 
Exact  nature  of  work . 

Reason  for  leaving 


(Indicate  by  X  which  of  the  above  concerns  you  would 
like  to  have  us  refer  to  as  references.) 

Have  you  ever  been  dismissed  or  requested  to  resign  from 

any  situation  ? 

(a)   If  so,  where,  when,  and  cause  of  dismissal 


3.  Have  you  ever  had  people  under  your  direction  ?. 
(a)    If  so,  where  and  how  many? 


4.  Have  you  had  any  experience  with  machinery' 
(a)   If  so,  give  details 


(b)   If  not,  are  you  mechanically  inclined?. 


5.  Previously  bonded ? (a)  What  companies? 

6.  State  any  special  qualifications  you  may  possess  which  will 
enable  us  to  form  an  opinion  as  to  your  fitness  for  employ- 
ment in  an  executive  position 


Please  give  the  names  and  addresses  of  three  persons  (in  addi- 
tion to  previous  employers)  not  related  to  you,  who  have 
known  you  for  some  years,  to  whom  you  would  like  to  have  us 
refer  as  to  vour  Character  and  Abilitv. 


1 

Name 

Address 

Business 

0 

3.  - 

Signature  of  Applicant. 


384     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


(Kindly  do  not  write  in  space  below.) 
COMMITTEE  RECOMMENDATION 


Problem  97 
Elden  Manufacturing  Company — Selection  of  Export  Salesmen 

It  has  been  the  policy  of  the  Elden  Manufacturing 
Company  to  fill  all  the  positions  in  its  sales  force  from 
men  who  have  served  an  apprenticeship  in  the  New  York 
office.  The  company  has  found  that  no  matter  how  much 
training  a  man  may  have  received,  a  probation  period 
under  the  immediate  supervision  of  the  export  manager 
is  desirable  in  order  to  familiarize  the  salesman  with  the 
policies  and  methods  of  the  company.  The  firm  gives 
precedence  to  men  who  are  willing  and  able  to  follow 
a  training  course  of  at  least  six  mouths  to  a  year  before 
being  placed  in  the  foreign  field. 

The  Elden  Company  manufactures  electric  supplies, 
such  as  light  sockets,  switches,  signal  systems,  and  a 
novelty  line  consisting  mainly  of  wireless  telephones  and 
receiving  apparatus.  The  product  may  be  considered 
as  technical,  but  during  the  few  months'  training  period 
in  the  New  York  office  an  intelligent  man  with  any 
mechanical  bent  at  all  can  usually  overcome  any  handi- 
cap due  to  lack  of  technical  training.  Its  markets  are 
principally  the  West  Indies,  Mexico  and  South  America, 
although  it  also  sells  some  electrical  equipment  in  Eng- 
land, France,  Java,  and  New  Zealand.  The  company 
distributes  its  product  direct  to  foreign  dealers  through 
its  own  sales  force.  Since  no  branches  are  maintained 
abroad,  each  salesman  operates  under  the  direct  control 
of  the  foreign  sales  manager  in  New  York  City. 


EXPORT  SALES  FORCE 


385 


At  present  there  is  a  vacancy  in  the  export  depart- 
ment. It  is  probable  but  not  absolutely  certain  that  the 
man  selected  to  fill  this  vacancy  will  be  sent  to  South 
America  after  his  training  course  is  completed.  An 
applicant  will  be  chosen,  first,  with  an  idea  of  his  use- 
fulness in  the  South  American  field,  and  second,  because 
of  his  general  utility  and  value  as  an  export  salesman. 
Naturally  enough  the  company  is  desirous  of  starting 
this  man  at  as  low  an  initial  salary  as  possible,  since  his 


Name ,„  full    (^'-^  fUc^^<,  f'^"' i..J3i}<>jLttLi}:sf-^yj/.'CC^ 

Bom  at    71ju^    fn^  GSSiZ  "'^Skcs^-Ji-'^  J  i.mo     Aa/gT" 

Slate  whelher  SinfHe,  Mamt^.  Widost^  or  Pivonrtl.     9^JJ«^<_ru^ln^<^ 
How  many  are  dependent  spon  you?       iS-uu^^ 
Whal  Salary  do  you  expea'^^  V  fftrO 


1^ 


3ir?  ac^jLue^./v.y  j  6>^^.0«A*3»-<^  «^.«A 


^p?/7  c^l^*/  c£^*«ee  n^^uAa  lU^ 


*>-gsj-«.>3.^ 


13»*fe^.>f« 


Are  you  a  gnrfuate  of  any  Hik'h  School  or  Collie 

Are  you  a  regular  Church  Attendani ' 

0(  whar  Nationaiiiy  are  your  Parents'      Father 


Whai  languages  do  you  speak  >         ^2>t-**«--t*4    «i^     ^c*--o>o-^ 
What  languages  do  you  wnte'         ^^^«««t^     cx*Ul    i>)o....o^ 
•eqiifeied  to  resigi 


y\st^^  u^  ^jLa^ 


3  resign  from  any  s 
i  Bond  ?         ifi  „ - 


lA^e 


Have  you  ever  been  dismisseo  or  i 
I(  so.  where,  when  and  cause  ol  di 
Are  you  able  lo  give  personal  Gua 
Have  you  previously  been  bonded ''  l//>^  Personal  or  Guarantee 

Are  you  ai  present  in  good  health  '  '    ti-t*. 

Have  you  dunng  recent  years  had  any  protracted  illness?         '>Lo  H  so.  give 

State  any  special  qualifications  you  may  possess  which  you  think  will  enable  us  to  (orm 
M'»~o~iu    Ji^^u^eJl  X<^**^    WA-^.c^    **^ 


lA^je^^^fija, 


fitness  lor  the  p-Aition  applied  for 
crf    tiU. 


6.  hf.  0'g^..„...j^ 


5)cur^       (Pxvtrfti 


tZyije*.,     (?■    t^^Tjtaxjg.t^.^^ 


tA~>gSp7i.^V^  Wov^.  ^frj^t-.,.  iMa 


^-<»-£tA  C^-.   if<MX4„,,&^Ayi^ff_  ^ 


CL^.  gg^^^  Oyfe  '?>.yc. 


zi<^iRB«  7;.iitja(  svsiui.  G=. 


S^jy<njsr  11^^^ 


«-*^«->A-<>e^  S-«^«'».>v-gjt  S-«>^^ 


C3u^^B^lkA^ 


FORM  6.  Elden  Manufacturing  Company— Application  No.  1 


386    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

value  ill  the  New  York  office  is  not  even  that  of  a  high- 
grade  clerical  worker  and  after  he  has  been  sent  to  the 
foreign  field  substantial  returns  from  his  efforts  cannot 
be  expected  for  another  six  or  twelve-month  period.  The 
company  has  no  definite  wage  scale  upon  which  to  base  a 
beginner's  pay,  each  man  being  paid  according  to  his 
abihty  and  experience.  Although  the  question  of  a  low 
salary  is  important,  ability  is  of  even  greater  importance 
and  is  usually  given  the  deciding  weight.     Seven  men 


QUCfTIONi 


Present    /       fS. 


I  ]'(ttff-^'^^  j^!~;^fc^%^ 


Name  m  full    »<i-t*t<ix  S  C?t>^'U&'»v/ 

Bo™  >\.,.^U^AjJ^,iZi^-^~c-^  ""xjd^Uki^/ci/S  *?'     AeeT<r 

S'ale  wh/her  S,<^ Married.  Wioower  or  tiivorcft.  f/ttt'iA^.e^^ 

How  many  are  detietidenl  upon  you?    ^[^  Suie  who  they  are  tj:i<L^_^   e£.J^ 

WhdtSaUry  do  you  expect  "'^2<J-»    .rf-       -TM^uT^  ' 

Are  you  related  to  any  Director  or  Employee  of  thi6  Co,' Tttf      If  so,  to  whom? —  Relationship. 

OW   UP   TO   DATE   OF   THIS    APPLtCATION. 


jUf  \/f'<'L- 


/f/f,)J.t.t^v^juec,,^  B/t-Jt^   1  /3^^^t*^,"?nct,^ 


'7>tuM^~ftA^ 


I74i.l^  ^^'._/*.»*  -"—^ 


M^7?f^. 


•iae 


II*' 


^J.*£l 


^U^iJU^^,    ^^'f-ttfa^    i  £ZAMA£i-'->^ 


aUiuAf 


rif 


/9ju  ^!<^>t.MCt/.><^<^.--w-<'«««<' Eo  I    /^I^rt^fei/,  "hta-a-d^ 


wux,  7u  xTu^ftty 


e'^. 


Are  you  a  (rri''u3le  of  any  Hinh  School  or  Cnlkfte 

Are  you  a  repular  Church  Altfnuant  -■      "7^ 

01  what  Nationality  are  your  Parentt'      Father^,^:^,,,.^^^ 

Whal  languages  do  you  speak  *  ^,Aja,,^.rf«...^,^ 

What  languages  do  you  write?        —       "" 

H*ve  you  ever  been  dismissed  or  requested  to  resign  (rom  ; 

If  BO,  where,  when  and  cause  o(  dtsmiv^l  ?       —        "" 

Are  you  able  to  give  personal  Guarantee  Bond  ?  x^^i*^ 

Have  you  previously  been  bonded?     /l^  (/ 

Are  you  at  present  in  good  health  '  X^/i£,d-^ 

Have  you  during  recent  years  had  any  protractfd  illness '^-^S^^tfrfx* 

State  any  special  qualifications  you  may  posst-ss  which  you  tnink  will 


e  and  location  of  Inst: 


Mother     S.— ,.^«-<C 


'Tu, 


Personal  or  Guarantee  Co? 


It  so.  give  nature  o(  same    <:jix.tfiMt/U.iu' 

us  to  form  an  opinion  as  to  youi  liiness  for  the  posibon  applied  fur 


4^^  ^  r.^JiSjJir- 


'^J^bu  ^Jr^.,t^i>,  (Syjttkb-^^  'h\.,uui    XoM"  jSjLt^^jdzz^ 


£r^  r^^jjA-^c^ 


^ 


.^L^«igw--^t^.■v.>>^^^^^^^^■    >XXu-^^^^ 


ji^t^iJclAj  fst\,a.^y^. 


Sa*->^AA^ 


""^ 


Sien.niire  „1  AiiflKani 


tJ-^r^M^LS.   </i*«4»«-r>=>^__ 


FORM  7.  Elden  Manufacturing  Company — Application  No.  2 


EXPORT  SALES  FORCE 


387 


have  applied  for  the  position  but  already  two  have  been 
rejected  as  undesirable.  From  the  five  remaining  appli- 
cants two  men  are  to  be  selected  for  final  interview  by 
the  export  manager. 

Problem  98 

Giles  Paper  Company— Should  Native  Salesmen  be  Employed 
IN  Preference  to  Americans? 


The  Giles  Paper  Company  is  contemplating  the  prac- 
ticability of  selling  its  merchandise  in  the  Latin  Ameri- 


Name  in  full    QxM\t^    K,    UixaA^^^ 
Bom  at  (hLio.<Ulfd.o.^        (Pa. 
Siatp  whether  SirtRle.  Mamed.  Widower  or  Di 
How  many  arp  dependent  upon  you'  /7  ) 

What  Salary  do  you  i 
Are  you  related  to  an 


x^-.  ?  Hff     Age      X.(a 

Slate  » 


P--n>  \/MA^AjA,JL.y^-X- 


your       ^l^ftKj^  jio.T -..« ...t,  ...       

nr  Employee  nfihit  Co '-6u     If  so.  lo  «honi>(8j^(J/t»*^  a.oe«.«<t*=lau<>''ship     ^l^^j./U^^ 


^ 


\(if^\m 


fi>^>Ji^'^iMt^      <f'oJ>l^    ^» 


4..;!.;A>^  ■»-  (W 


^*tI»^A_  uf.iU><*«^   O 


^oMa/^uji^ 


(Ju»*»«'    Y^  "tf ' 


n 


fvut^ 


yrjuc^  ^Quj^ 


Are  you  a  grifluate  rrf  any  Hinh  Schnol  or  Coll-'pe ?     lA 


le  and  location  of  Instit 


?       -^W-.     '  lr-.«l.e,e'    %-itL.^uAr'^xjUA.t^ 

I?      Father       (XivjAct^OA-^  Motner    Cc«««aa. 


!d  to  resign  from  any  Rituation '        v^iAy 
Bond '  r  ' 


Are  you  a  regular  Church  A 

Of  what  Nationality  are  your  Parenti 

What  languages  do  you  •peak  ? 

WhatlanguBgcpdoyou  fcrite?      Qi     JUixU      ^Aj^^^tk^   a>^     >4**a.      ^^ 

Hive  yoo  ever  been  dismissed  or  requested  to  resign  (rom  any  Rituation'  '     'ufMy 

If  ao,  where,  when  and  cause  of  dismissal 

Are  yoo  able  to  give  pergonal  Guarantee  Bond 

Have  you  previously  been  bonded ?    ^Y[%  Personal  or  Guarantee  Co  ' 

Are  you  at  present  in  good  health  ?  '^■'T-^x*-' 

Have  you  during  recent  years  had  any  pmtracted  illness'      V[o  1'  »■  fP^«  nature 

Sate  any  special  qualifications  ynu  may  possess  which  you  think  will  enable  us  to  form  an  opi »  as  n-  ,yui  ..u.«j,  .y.  .^..^  ^^^^,.  ^kk-—  — 


r  fitness  (or  the  position  applied  for 


t      T-\>C'iA^«-     -i-**--    Ctv^w**     AyCO'-yr.a^       t-AA-ifOX* 


jaf 


/r*vv-M.a 


Ijjl'ia^ .-(y/aZ*-  7r>virv-&<^«^^ 


(UiJ,^^    tl 


fJt 


y.<u.><A,  X.  ^^ 


(1^i>U.:t    '^^A.^^v^6H, 


-^,%..-<A^0^     JOC^^     %IL 


n^  J<u:iL  A'i-  l&^-X,^  ^. 


(  iUa^    lr(tqui.iK.   (lf,^t^ 


yClKi^nJU    PaJ^    ti. 


Slgn.,.,.rc  ..(   Appli.an 


FORM  8.  Elden  Manufacturing  Company — Application  No.  3 


388    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

can  field  through  native  salesmen,  discontinuing  its  pres- 
ent policy  of  employing  only  English  and  Americans. 
With  the  falling  off  of  foreign  sales  in  1920  and  1921  the 
reduction  of  operating  expenses  began.  Advertising 
appropriations  were  cut  to  a  minimum,  and  the  force  of 
stenographers,  clerks,  and  other  office  employees  was 
reduced  to  so  low  a  number  that  it  could  barely  take  care 
of  the  business,  even  though  the  volume  of  sales  had 
diminished.    The  foreign  sales  force  was  reduced  slightly 


Morn  M/aJ^a-<^^ ,    ^.<i.U^™         5?^«/:/y  l'-'<"      Age    ^^7 


Sngle,  Marrfed,  Widower  or  Divorced 
How  mnny  are  dependent  upon  you 
What  Salary  do  you  evpect?"^^.    ^U^  %t 
Are  you  related  to  any  Director  or  Employee  of  this  Co.?    *^q 


?    *77cs  11  so.  to  whom? Relationship,     p^ 


Jyu-e-^Jki^   CAj  hi*^i--^X^^ 


Are  yoa  a  pndujtc  of  any  Hith  ScIukiI  or  Colkge?  ^k 
Are  you  a  regular  Church  Attendant '  ^IJH^ 
Of  what  Nationality  are  your  Parents?  Fither  CC** 
What  languages  do  you  speak  ?  ^j^f^^M-c<-^ 
What  languages  do  you  write?  _,,-<2?,i5<a,»vt.^A^ 
Hive  you  ever  been  dismissed  or  refjucstefl  to  rc5ipn  fron 
If  so,  where,  when  and  cause  ol  dismissal  ?  y/o 

Arc  you  able  to  give  personal  Guarantee  Bond  :*         2:^ 
Have  you  previously  been  bonded  ''  ~^c  / 

Are  you  at  present  in  good  health  ?    ^/t  tA^ 
Have  you  during  recent  years  had  any  protracted  illness: 
Slate  any  special  qualifications  you  may  possess  which  yoi 


A  location  of  Institutttrfi'-^^/,^^, 
Mother        ^'  J^Xc^.^ 


^/^ 


-  '^<- 


Simon  as  10  >oui  innt'ss  for  ih;  pofcition  appli'_'d  for 


j^  Ll.  ^  C  '^cJ^A^ 


^9Z  MU6^:tu^  ^^  /i-,^^ 


/^/l<U4^f'Ul^\/^lJ„^t^ 


Ctjl^i£;:iS^ 


'iu.cjJ. /^a^ 


'<L-tJu»^  vJ.cotj.—tj-'TnLcci^  fe^L-o-g/, 


(^ 


L.^^Y^'^  ^^-^ 


9A^  ;?.^.  ^x 


li^fJ^JT}  71^    -^f^^  ,<3Wl-^ 


s/w    ^^J^^^*^^ 


FORM  9.  Elden  Manufacturing  Company — Application  No.  4 


EXPORT  SALES  FORCE 


389 


but  the  number  could  not  be  lessened  substantially  if  it 
were  to  continue  to  cover  the  territory  effectively.  Since 
living  conditions  for  Americans  in  most  cities  in  Latin 
America  had  not  changed  perceptibly,  it  was  feared  that 
a  cut  in  salaries  would  be  accompanied  by  a  lower  effi- 
ciency. 

In  selling  paper  in  small  lots  the  Giles  Company  must 
keep  in  close  contact  with  a  large  number  of  small  cus- 
tomers.    It  operates  branches  in  Havana,  Mexico  City, 


BY  APPtrCAST  i: 


Name  m  full     'KMi^z.^,^  C  ''ff? a.^'l^< 

Born  at      (W,JUiXut^,  (D'iiu       o"     %W 

STate  whether  Single,  Married.  Widower  or  Divorced.     O 

Kow  many  are  dependent  upon  you?      (jj-j^^ji^ 

What  Salary-  do  you  expect 'Vi'iJ.^.j^^^,.,^  _^ 

Are  you  related  to  any  Director  or  Employee  of  this  Co.?    "i? Y(>-  '* 


Present   I      ^^-jj 
Address  1 
'.neO     Ase   a  I 


Stafe>vho they irtTi^/l^^^  -^.^.^JiJ^Ju  ,^.^tL  /.  'AzL  -f  mJ/ 


^V 


tU^iu'  5w>  (Pa 


vL^  <y,^  O^'ir 


c^iC 


<Lj~^t 


fh 


a  gri-^uate  of  any  Hiah  'vrhfx)!  or  Cnll*-ge 

3  regular  Church  At'endam  ?       ■  -    ■    - 

Ot  what  Naiionality  are  your  Parents?  ^Father        /J^^ 


t  and  location  of  In: 


Us 


A^ 


'L^^c.^K.^O  Mother    C7yy»^JiA^,yt.'0.'^ 

m1  to  resign  (rom  any  situation?  0^1  c 


What  languages  do  you  speak 

What  languages  do  you  write 

H^ve  you  ever  been  dismissed  or  requested' 

U  so,  where,  when  and  cause  of  dismissal?  ^:? 

Are  you  able  to  give  perK>nal  Guaianiee  Bond  ?      «(^t*.*^^  ^  h-i/L.^~uJ' 

Have  you  previously  been  bonded?  r\^  Personal  or  Guarantee  Co. 

Are  you  at  present  in  good  health  ?  ^iJjS^ 

f  pr«racted  illness?     /"^jj^ttf-  "  »■  g'^'e  nai 


Have  you  during  recent  yea 
State  any  special  qualificatto 


d  may  possess  which  you  thnik  will  enable  us  to  lorm  an  opinion  a 


I  your  fitness  for  the  position  applied  for 


-^U-«»-tt-l-'        ^^f.A'l.^  OLA. 


-f^Cl,  %*^9  /^-A/^^  , 


.//.   /f . 


.y/7,7WT^^:,.7 1.'^  y^^tCoL 


'//.  »r  C  ,%^^^M-( 


Xi^t\/.      C<        ^  ./^^-i^tjyj^'^-:. 


W  hik.L.,.^      ■t<',  z^i-    O'a 


dS^ 


■^^U  >/r' 


(   "k^^jJ^^       '-StU^AMyU- 


--vv./^ JCi,//.^'/  rs,„,  'J-  G^ 


>{.CL<Ji^^-^,-t'    (  ''  'yf{ajd/Ayn> 


FORM  10.  Elden  Manufacturing  Company — Application  No.  5 


390    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Rio  dc  Janeiro,  Buenos  Air^s,  and  Santiago.  Each 
branch  employs  from  three  to  seven  salesmen  who  call 
on  book  binders,  printers,  publishers,  newspapers,  sta- 
tioners, and  other  large  consumers  of  paper  in  their  ter- 
ritory. These  men  are  all  native  Americans  or  British 
who  represent  the  type  of  salesman  the  company  has 
found  to  be  the  most  successful  in  this  field.  They  speak 
Spanish  like  natives,  understand  the  methods  and  poli- 
cies of  the  Giles  Paper  Company  in  carrying  on  its  busi- 
ness in  Latin  America,  and  are  acquainted  with  the  buy- 
ing habits  and  customs  of  South  American  customers. 
These  salesmen  are  efficient,  capable  men,  whose  salaries 
run  from  $3000  to  $5000  a  year.  In  times  of  prosperity 
it  has  been  possible  for  them  to  sell  enough  paper  to  keep 
the  percentage  of  selling  expense  fairly  low,  but,  in  times 
of  depression,  the  situation  is  radically  different. 

Native  Latin  Americans,  even  of  the  educated  class, 
are  able  to  live  more  cheaply  than  Americans  or  Eng- 
lishmen because  they  know  the  country  better  and  under- 
stand how  to  take  advantage  of  its  opportunities.  They 
do  not,  as  a  rule,  live  in  the  expensive  sections  of  the 
city  frequently  occupied  by  an  American  or  English  col- 
ony. Having  been  born  and  brought  up  in  South  Amer- 
ica their  tastes  and  habits  are  those  of  the  country  in 
which  they  reside  and  they  are  content  to  eat  native 
food  instead  of  expensive  imported  products  from  the 
United  States.  A  good  native  salesman  can  usually 
be  secured  at  about  one-half  or  two-thirds  the  salary  of 
an  American  or  English  salesman  but  he  is  apt  to  be  less 
efficient.  During  a  dull  season  he  may  be  paid  a  nominal 
sjjlary,  but  as  prosperity  returns  and  he  has  an  opportu- 
nity to  make  more  money  by  increasing  his  sales  he  is  fre- 
quently inclined  to  be  content  with  his  old  salary  and  be 
rather  lax  in  his  work,  with  the  result  that  a  larger  num- 
ber of  salesmen  are  needed  to  cover  this  territory. 

Should  the  Giles  Paijer  Company  adopt  the  policy  of 
employing  native  J^iatin  American  salesmen? 


EXPORT  SALES  FORCE  391 

Problem  99 
VoLK  Paint  Company — Training  of  Salesmen* 

The  experiments  of  the  Volk  Paint  Company  in  send- 
ing domestic  salesmen  into  tlie  foreign  field  have  not 
been  successful.  This  firm  is  one  of  the  best-known  paint 
and  vanfish  manufacturers  in  America,  advertising  ex- 
tensively throughout  the  United  States  and  Canada,  both 
in  billboards  and  magazines.  In  addition  to  making 
paints  and  varnishes  this  company  produces  shingle 
stains,  paint  brushes,  painters'  supplies,  and  artists'  ma- 
terials, such  as  water  colors,  oil  paints,  easels,  palettes, 
and  numerous  styles  of  brushes.  Its  main  factory  is  lo- 
cated near  Chicago,  but  it  maintains  sales  branches  in  all 
but  two  of  the  Federal  Reserve  districts,  and  operates 
retail  stores  in  New  York,  Chicago,  and  San  Francisco, 
Much  of  the  company's  success  in  the  United  States  has 
been  due  to  its  energetic  and  well-managed  sales  force, 
which  sells  direct  to  the  retail  trade.  It  w^as  this  fact 
more  than  any  other  which  led  the  firm  to  send  American 
salesmen  to  the  South  American  market. 

Originally  like  many  other  American  manufacturers, 
the  company  relied  almost  entirely  upon  commission 
houses  for  foreign  orders,  but  finally  decided  to  send  one 

*Tlie  following  references  deal  with  education  and  training  for  foreign 
representatives : 

Training  for  Foreign  Trade,  Bureau  of  Foreign  and  Domestic  Commerce, 
Washington,  1919,  by  R.  S.  MacElwee  and  F.  G.  Nichols. 

Printers'  Ink. 

May  1,  1919,  p.  141— "The  Day's  Work  in  an  Exporting  House." 
Sept.   2,   1920,   p.   125— "  First-Hand   Ad\dce   to   Salesmen   in   Latin 

America. ' ' 
July    14,    1921,    p.    25— "  Preparing    the    Export    Salesman    for   tJie 

Field. ' ' 

The    World's   Markets. 

Mar.  1919,   p.  27— "The  Study  of  Commercial  Geography." 
May  1919,   p.   22— "Commercial   Education   for  Foreign   Trade." 
June  1920,  p.  50— "Education  for  Foreign  Trade." 
Jan.   1921,   p.   25— "Training  the  Export  Salesman." 
Mar.  1921,  p.  25— "Foreign  Trade  Education." 
Apr.    1921,   p.    30— "Education    for    Foreign    Trade." 
June  1921,  p.  24— "Foreign   Trade  Education." 
June  1921,  p.  24— "Mexican-American   Scholarships." 


392    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

or  two  salesmen  to  South  America  to  try  out  the  field  in 
Argentina  and  Brazil.  In  its  first  experiment  the  com- 
pany advertised  for  export  salesmen  and  selected  from 
the  applications  received  two  men,  who  had  lived  in 
these  countries  and  could  speak  Portuguese  and  Span- 
ish. They  were  given  a  hasty  course  of  instruction  in 
the  kinds  and  uses  of  Volk  Paint  Company's  products 
before  being  sent  to  Rio  de  Janeiro  and  Buenos  Aires. 
Although  these  men  knew  the  language,  they  knew  lit- 
tle about  the  technique  of  export  work ;  neither  did  they 
have  a  thorough  grounding  in  the  practical  use  of  paints 
and  varnishes.  The  orders  which  they  sent  to  the  New 
York  office  did  not  give  sufficient  information  as  to  the 
methods  of  shipping  that  should  be  employed,  neither 

New  York  Evening  Post. 

June  25,  1921— "Adequate  Training-  Is  Being  Urged  as  a  Means 
of   Meeting   Foreign   Competition. ' ' 

Business    Training    Corporation,    1917--"  The    New    Foreign    Trade"; 
1018 — "A  New  Factor  in  Executive  Success." 

Cooper,  Foreign  Trade  Marlets  and  Methods,  Chap.  V. 

Journal  of  Political  Eronomy,  June  1922,  by  James  E.  Moffat — "Courses 
in  Foreign   Trade. ' ' 

Proceedings  of  annual  conventions  of   National   Foreign  Trade  Council. 
1915,    p.    173,    Dr.    Edwin    F.    Gay —"Commercial    Education    for 
Foreign    Trade. ' ' 

1915,  p.  229,  group  session — "Commercial  Education  for  Foreign 
Trade. ' ' 

1916,  p.  144,  Wallace  D.  Simmons — "Keport  of  the  Committee  on 
Commercial  Education  for  Foreign  Trade  of  the  Natioiuil  Foreign 
Trade   Council." 

1916,  p.  159,  Dr.  E.  E.  Pratt— "  Education  of  Men  for  Foreign 
Trade." 

1917,  p.  391,  group  session — "Commerci.d  Education  for  Foreign 
Trade." 

1918,  p.  222,  G.  L.  Swiggett — "Educational  Preparation  for  Foreign 
Service. ' ' 

1918,  p.  245,  Selden  O.  Martin — "Practical  Commercial  Education." 
1918,    p.    262,    George    II.    Kichards — "Commercial    Education    for 
Foreign   Trade — Fundamental — Special   and   Post-Graduate. ' ' 

1918,  p.  269,  Howard  E.  Cole— "  Standard  Oil  Company  of  New 
York    Foreign   Service    Class. ' ' 

1919,  p.  108,  K.  S.  MacElwee — "Vocational  Education  for  the  Busi- 
ness  of   Exporting. ' ' 

1921,  p.  47,  Dr.  J.  A.  de  Haas — "Fundamentals  in  Foreign  Trade 

Education. ' ' 
1921,    p.    57,    W.    S.    Tower — "Means    of    Getting   an    International 

Viewpoint  in  Foreign  Trade  Education. ' ' 


EXPORT  SALES  FORCE  393 

(lid  they  iudicat.'  for  what  purpose  the  paLiits  were  to 
be  used,  nor  what  difficulties  with  foreign  customs  laws 
might  be  avoided  with  proper  care. 

After  several  months,  when  it  had  become  apparent 
that  nothing  at  all  startling  had  happened  to  the  com- 
pany's sales  volume  in  this  field,  it  was  decided  to,  send 
George  Applegate,  the  company's  third  best  salesman  in 
the  domestic  market,  to  Buenos  Aires  in  an  attempt  to 
liven  up  the  trade  f  I'om  that  territory.  Applegate  sailed 
for  South  America  in  high  spirits,  but  after  several 
months  had  passed  orders  failed  to  be  forthcoming.  In 
the  first  place,  he  was  seriously  handicapped  by  his  in- 
ability to  speak  a  word  of  Spanish  and  his  failure  to  un- 
derstand the  business  conditions  and  buying  habits  of 
his  customers.  This  difficulty  might  have  been  overcome 
by  a  little  apphcation,  but  Applegate  found  congenial 
friends  in  the  American  colony  in  Buenos  Aires  and  did 
not  attempt  to  become  thoroughly  acquainted  with  the 
Argentineans  themselves.  To  all  intents  and  purposes 
he  might  almost  as  well  have  been  in  New  York  as  far 
as  his  understanding  of  Argentinean  methods  was  con- 
cerned, and  he  was  finally  recalled  to  the  United  States 
where  he  was  given  his  old  territory,  much  to  the  rehef 
of  both  himself  and  the  company. 

The  Volk  Paint  (Jompany  next  made  another  attemjit 
to  send  a  domestic  salesman  to  Latin  America,  but  this 
time  it  made  sure  that  its  representative  could  at  least 
speak  the  language  of  the  country  to  which  he  was  sent. 
Harold  Beyers,  the  man  chosen  for  this  second  experi- 
ment, was  about  32  or  33  years  of  age  and  had  previously 
handled  part  of  the  company's  territory  in  New  York 
City.  Beyers  was  sent  to  Rio  de  Janeiro  and  at  once 
proceeded  to  cover  his  territory  in  his  usual  efficient  man- 
ner. He  called  upon  as  many  dealers  as  possible  each 
day  and  adopted  the  tactics  that  had  proved  successful 
in  New  York ;  but  the  orders  failed  to  come  in.  Native 
Brazilians  appeared  more  willing  to  buy  inferior  qual- 
ity paints  from  their  friends  than  to  purchase  high- 
grade  products  from  a  stranger.     About  this  time  the 


394     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

firm  wrote  JMr.  Beyers  tellmg  liini  how  expensive  it  was 
to  keep  a  salesman  in  the  foreign  field  and  ended  up  by 
hoping  that  he  would  leave  no  stone  unturned  in  order  to 
get  a  large  volume  of  business,  so  that  his  percentage  of 
sales  expense  would  not  be  too  high.  Knowing  the  small 
number  of  orders  which  was  resulting  from  his  efforts, 
he  resolved  to  reduce  expenses,  at  any  rate,  and  began 
living  at  moderate-priced  hotels  and  watching  his  expense 
accounts  as  closely  as  possible.  Sales  fell  off  even  more, 
and  Mr.  Beyers  was  finally  recalled  to  New  York  as  had 
been  his  colleague,  Mr.  Applegate. 

At  a  recent  conference  the  heads  of  the  sales  depart- 
ments of  the  Volk  Paint  Company  all  expressed  their  dis- 
appointment over  the  failure  of  the  company  to  secure 
a  firm  hold  on  the  Latin  American  market.  They  are  sure 
that  the  men  selected  to  represent  the  company  abroad 
were  capable,  conscientious,  and  hard-working  salesmen, 
but  they  are  convinced  that  these  men  failed  because  they 
were  not  prepared  to  meet  the  conditions  as  they  exist  in 
South  America.  They  therefore  wish  to  have  drawn  up 
an  outline  of  the  qualifications  and  system  of  training 
necessary  for  their  salesmen  to  operate  successfully  in 
Latin  America. 


Problem  100 

:  The  Atlantic  Electric   Company — Training  of  Salesmen 

The  Atlantic  Electric  Company  manufactures  in  its 
several  plants  an  extensive  line  of  motors,  dpiamos,  and 
electrical  supplies  for  industrial  and  central  plant  equip- 
ment. It  has  branches  or  agents  in  all  the  principal 
cities  of  the  world  and  has  segregated  its  foreign  busi- 
ness in  a  subsidiary  corporation  called  the  Atlantic  In- 
ternational Electric  Company.  One  of  its  very  great 
difiSculties  in  the  conduct  of  its  business  in  foreign  fields 
lies  in  the  difficulty  of  securing  salesmen  and  representa- 
tives who  will  properly  represent  the  company.     The  of- 


EXPORT  SALES  FORCE  395 

ficials  feel  that  they  must  have  men  with  some  degree  of 
training  and  have  finally  come  to  the  conclusion  that  it 
is  much  better  to  secure  men  with  fundamental  cultural 
or  technical  training  and  to  attempt  training  in  the  de- 
tails of  their  foreign  business  rather  than  to  choose  men 
purely  on  the  basis  of  their  foreign  experience.  The  com- 
pany is  a  member  of  the  National  Association  of  Cor- 
poration Training,  A  committee  of  this  association  in 
1921  made  a  report  of  training  in  which  the  practices  of 
a  number  of  prominent  companies  were  summarized.  Ex- 
tracts from  this  report,  which  seemed  to  have  some  ap- 
pUcation  to  the  problems  of  the  company,  follow:* 

"The  Standard  Oil  Company,  New  York  City. 

' '  Our  policy  is  to  con&ie  our  training  to  men  especially  quali- 
fied to  take  up  this  particular  work.  We,  therefore,  eliminate 
poor  material  before  the  class  starts  and  are  thus  able  to 
concentrate  the  training*-  on  a  few  speciality  qualified  men. 
These  men  in  the  past  have  been  selected  from  the  various 
universities  and  from  our  own  organization.  We  are  striving 
more  and  more  to  find  among  our  own  employees  any  who 
are  particularly  suited  to  take  up  this  training. 
"Our  classes  are  composed  of  about  twelve  men,  six  or  eight 
of  whom  are  given  the  foreign  service  training.  In  the  past 
these  classes  have  been  started  every  ten  weeks,  covering  a 
period  of  tAventy-six  weeks.  We  aim  chiefly  to  teach  the  men 
the  details  of  our  business,  the  manufacture  of  our  products 
and  the  organization  and  function  of  the  different  depart- 
ments in  our  company,  in  particular  the  foreign  departments 
operating  in  the  locality  to  which  each  man  will  be  sent. 
''The  course  consists  of  ten  weeks  of  practical  experience  in 
our  refineries,  where,  under  the  supervision  of  an  instructor, 
the  men  learn  the  manufacture  of  our  products.  They  are 
then  transferred  to  one  of  our  marketing  fields  for  ten  weeks, 
where,  also  under  an  instructor,  they  learn  how  we  market 
our  product  and  how  our  substations  and  general  offices  are 
managed.  On  the  completion  of  this  work  they  are  trans- 
ferred to  tlie  New  York  offices  for  six  weeks,  where  in  the 
various  foreign  departments  they  finish  the  training.  During 
these  twenty-six  weeks  they  are  trained  by  actual  experience 
rather  than  by  observation  of  the  work. 

*The    National    Association    of    Corporation    Training,    9th    annual    pro- 
ceedings, 1921,  pages  257  et  seq. 


396     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

"Tn  addition  to  this  the  men  are  given  a  course  in  the  hm- 
g'uage  nsed  in  the  country  to  which  they  will  be  sent.  Each 
week  an  officer  of  the  company  or  a  department  head  gives 
a  lecture  on  some  phase  of  the  company's  business  so  that 
they  will  get  a  broader  experience  of  the  work  they  will 
undertake. 

"A  library  of  technical  books  is  furnished  to  assist  them  in 
their  refinery  work.  Also  from  time  to  time,  depending  on 
the  particular  work  to  which  a  man  is  assigned,  other  books 
are  recommended. 

"During  the  period  of  training  the  men  are  paid  twenty-three 
dollars  a  week,  in  addition  to  any  expenses  incurred  in  the 
})erformance  of  work  a.ssigned. 

"We  do  not  restrict  our  work  to  college  graduates,  as  we  be- 
lieve this  is  unnecessary,  but  we  do  stipulate  that  a  man  shall 
have  had  the  equivalent  in  business  experience.  As  a  matter 
of  fact  we  seiid  a  great  many  college  men  who  apply  to  us 
for  work  out  to  one  of  our  ])laiits  to  get  that  practical  experi- 
ence which  we  deem  to  be  of  vital  imi)ortance,  not  only  because 
of  what  he  may  learn  but  also  as  a  further  test  in  judging 
a  man." 

W.  R.  Grace  &  Co.,  New  York  City. 

"A  matter  of  vital  importance  to  such  oi'ganizations  as  the 
Grace  Company  consists  in  the  conduct  of  educational  classes, 
intended  both  to  bring  students  together  in  close  personal 
contact  and  work  to  a  common  end  and  to  fit  them  for  par- 
ticular fields  of  activity.  In  the  home  office  of  W.  R.  Grace  & 
Co.  these  classes  meet  on  Tuesdays  and  Thursdays  from  five 
to  six  forty-five  on  the  following  subjects :  Elementary  Span- 
ish, Intermediate  Spanish,  Advanced  Spanish,  Commercial 
Geography,  Talks  on  Accounts,  Typewriting  Course  (given  in 
small  groups  of  three,  four  and  five  persons). 
"In  addition  to  these  regular  courses,  special  training  is  given 
for  particular  students  and  a  series  of  lectures  running 
through  the  year,  upon  subjects  of  most  vital  moment  in  the. 
activities  of  the  firm.  Some  of  these  lectures  ai'e  given  by 
heads  of  departments  or  si)ecialists  in  the  organization  itself, 
while  occasionally  outside  lecturers  are  secured. 

"A  further  assistance  to  the  mental  training  of  individuals  is 
afforded  by  a  carefully  chosen  library,  a  ]K)rtion  of  which  is 
filled  Avith  books  for  ciicnlation  and  the  other  portion  with 
reference  books.  Hundreds  of  iiiend)ers  of  the  firm,  at  the 
home  office,  borrow  these  hooks  evei'y  month  for  two  weeks' 
reading,  Avhile  the  P]tlitorial  Department  is  constantly  in  de- 


EXPORT  SALES  FORCE  397 

mand  by  \arious  members  of  the  house  who  wish  to  consult 
maps,  dictionaries,  trade  encyclopedias  and  various  works 
in  different  langniaoes,  as  these  relate  to  their  several  de- 
partments. ' ' 

"American  Locomotive  Company,  Schenectady,  New  York. 

"The  men  selected  for  work  in  our  Foreign  Department  are 
usually  given  a  two-year  course  of  training  in  the  engineering 
and  maiiufacturing  departments,  as  well  as  some  experience 
in  the  foreign  office  of  the  company  in  New  York  City.  The 
shop  training  is  intended  to  familiarize  the  men  with  the  com- 
pany's manufacturing  methods  and  standards  of  workman- 
ship, while  the  engineering  experience  covers  the  impoi'tant 
elements  in  locomotive  design  and  general  calculation  pertain- 
ing to  tlie  proportioning  of  locomotive  parts.  Literature  is 
supplied  dealing  with  the  locomotive  and  the  company 's  prac- 
tice, and  in  most  cases  the  men  have  taken  special'  evening 
classes  relating  to  locomotive  work. 

"After  the  preliminary  training  and  service  in  the  home 
office  of  the  foreign  department,  these  men  are  placed  as 
assistants  in  the  sales  offices  in  foreign  countries  and  are 
advanced  according  to  the  ability  shown. 
"Such  outside  study  as  is  required  to  prepare  men  for  work 
in  the  foreign  department  is  usually  borne  by  the  individual, 
but  not  infrequently  the  expense  has  been  partly  carried  by 
the  company. 

"Recruits  are  preferred  from  among  college  graduates,  par- 
ticularly those  who  have  taken  mechanical  engineering  courses. 
It  has  been  the  experience  of  ouj  company  that  college  train- 
ing has  a  decided  advantage  in  developing  a  man's  initiative 
and  enabling  him  to  analyze  conditions  relating  to  his  work 
and  find  solutions  for  the  problems  presented,  to  an  extent 
not  found  in  most  men  who  have  not  had  college  training. 

"We  believe  the  important  elements  in  the  training  for  foreign 
service  are : 

(a)  A  thorough  knowledge  of  tlie  company's  mechanical 
practice. 

(b)  A  knowledge  of  the  essentials  of  its  engineering 
practice. 

(c)  The  handling  of  responsible  work  in  the  home  office, 
which  w^ould  give  an  appreciation  of  the  relation  of 
work  in  the  foreign  field  to  that  of  the  industry. 

(d)  The  development  of  sound  judgment  in  business  re- 
lations. 


398     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

(e)  A  knowledge  of  modern  salesmanship. 

(f)  A  clear  understanding-  of  the  characteristies  of  people 
to  be  met  with  in  the  foreign  field." 

American  Trading  Company',  New  York  City. 

'^(1)  Qnestion. — ^What  institutions  do  you  eonsider  to  be 
doing  effeetive  work  in  training  students  for  our  foreign 
trade  ? 

Answer. — -W.  11.  Grace  &  Co.,  National  City  Bank, 
American  Trading  Co.,  Arkell  &  Douglass,  Guaranty 
Trust  Co. ;  Harvard  and  New  York  University  and 
other  colleges  that  give  a  certain  amount  of  theoretical 
training. 

"  (2)  Question. — What  books  have  you  found  most  useful  to 
suggest  to  schools  or  business  corporations  for  use  in 
such  training? 

Answer. — '  Practical  Exporting, '  by  Hough ;  '  Foreign 
Exchange  Explained, '  by  Escher,  and  certain  bank 
publications. 

*'(3)   Question, — Could    you    suggest    certain    places    where 
schools  or  colleges  are  cooperating  with  business  houses 
in  training  men  for  overseas  trade? 
Answer. — New  York  University,  Columbia  University 
and  Harvard  University. 

"(4)  Question. — What  do  you  consider  to  be  the  most  vital 
subjects  to  be  taken  up  in  a  course  of  study  intended 
to  fit  men  for  foreign  trade  careers? 
Answer. — Routine  necessary  to  exporting  and  importing 
— a  certain  amount  of  export  finance — concentration 
and  common  sense — general  executive  ability  and  the 
power  to  handle  adequately  much  detail  work  and  to 
assume  responsibility. ' ' 

General  Motors  Export  Company,  New  York  City, 

"Unfortunately,  on  account  of  the  recent  and  rapid  growth 
of  our  export  trade,  very  few  Americans,  trained  and  ex- 
perienced in  the  export  field,  are  available  for  foreign  service; 
therefore,  the  American  manufacturer  who  wishes  to  expand 
his  overseas  forces  and  to  develop  his  organization  is  obliged 
either  to  take  men  ti'ained  in  the  domestic  field  and  transplant 
them  into  unfamiliar  surroundings  and  conditions  abroad,  or 
1o  give  young  men  of  the  desired  mental,  moral  and  physical 
calibre  a  course  of  intensive  training  for  overseas  service. 
"The  General  Motors  Export  Company  has  selected  the  latter 
alternative  as  the  one  most  likely  to  ])i-ovide  men  qualified  to 
successfully  uphold  the  best  traditions  of  American  business 
here  and  abroad.    It  has  established  and  is  now  conducting  the 


EXPORT  SALES  FORCE  399 

General  Motors  Export  Company's  Training  School,  which  is 
designed  to  equip  men  to  represent  it  in  the  various  branches 
ot  Its  foreign  activities  after  a  thorough  training  in  its  class- 
rooms, shops  and  offices. 

"Due  to  the  fact  that  a  year  is  the  minimum  time  required  to 
teach  even  men  of  exceptional  ability  the  rudiments  of  the 
export  business  and  the  merchandising  in  overseas  territory 
ot  the  numerous  products  (including  motor  cars,  trucks  tract- 
ors, and  lighting  outfits)  which  this  company,  as  the  export 
division  of  the  General  Motors  Corporation,  markets  it  is 
necessary  that  the  men  accepted  for  training  possess  most  of 
the  known  essentials  for  success  in  the  overseas  business  fields 
before  entering  the  training  school. 

"Our  company  maintains  a  library  to  which  are  constantly 
being  added  such  books  on  business,  commercial  geographv 
and  foreign  trade  in  general  as  recommend  themselves  to  our 
lavorable  consideration. 

"A  daily  News  Annalist  published  within  our  office,  and  con- 
taining extracts  on  commerce  in  general  taken  from  various 
newspapers  and  publications,  domestic  and  foreign,  is  also  used 
m  giving  our  men  general  and  specific  knowledge  concerning 
our  trade  abroad.  ^ 

"Since  this  company  offers  to  certain  selected  employees  full 
enrollment  m  the  school,  and  to  any  employee  the  privileo-e  of 
enrolling  for  such  of  the  courses  as  will  make  him  more  valu- 
able. It  has  not  been  felt  necessary  to  recommend  outside  study 
"Although  it  might  be  safe  to  say  that  the  best  men  usuallv 
come  from  the  college  of  commerce,  and  graduate  school  of 
business  administration,  this  company  has  found  good  ma- 
terial withm  Its  own  ranks  as  well  as  elsewhere.  Since  the 
course  has  only  been  established  since  April,  1920  sufficient 
time  has  not  elapsed  to  make  a  definite  statement  which  would 
serve  as  a  guiding  principle. 

"It  is  felt  that   other  things  being  equal,  a  college  graduate 
will  forge  ahead  faster  after  he  has  assimilated  the  technical 
knowledge  necessary  to  the  understanding  of  the  business 
"Naturally  it  is  thought  that  the  ideal  means  for  fitting  men 
to  take  responsible  positions  abroad  is  through  the  establish- 
ment of  a  training  school  operated  by  a  company;  but  since 
many  firms  would  not  find  so  expensive  an  operation  profit 
able.  It  IS  believed  that  sufficiently  specialized   courses  can 
be  bad  in  some  of  the  larger  universities. 
"This  of  course  does  not  help  firms  which  may  be  situated 
at  a  distance  from  these  seats  of  learning.    In  such  cases  we 
believe  that  enrollment  m  recognized  correspondence  schools 


400    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

is  helpful,  but  that  it  should  be  supplemented  with  weekly- 
discussion  periods,  attended  by  executives  of  the  company  and 
backed  up  with  the  employees'  practical  application  to  their 
own  business." 

E.  I.  DuPoNT  DE  Nemours  Export  Company,  New  York  City. 

"We  have  no  particular  school  for  training  our  foreign  repre- 
sentatives, but  the  Domestic  Company  maintains  at  Wilming- 
ton a  school  for  the  education  of  salesmen.  This  course  takes 
from  three  to  four  months  and  educates  the  employees  as  re- 
gards the  manufacture  and  use  of  the  various  products  of 
the  company, 

"After  this  course  has  been  completed,  a  representative,  if 
he  is  to  be  connected  with  the  Export  Company,  is  brought  to 
our  main  office  in  New  York  and  kept  there  from  one  to  two 
months  and  is  given  an  education  in  our  methods  of  doing 
business  through  our  various  departments,  such  as  the  order 
department,  advertising  division,  filing  department,  etc.,  de- 
pending upon  whether  he  is  to  be  a  salesman,  a  sales  repre- 
sentative, or  an  office  man  in  one  of  our  foreign  offices. 
"Before  entering  the  service  of  our  company  it  is  necessary 
for  an  applicant  to  interview  at  least  three  of  our  representa- 
tives and  also  to  pass  a  physical  examination.  If  the  inter- 
views and  physical  examination  are  satisfactory  the  applicant 
is  then  placed  on  the  regular  payroll  and  sent  to  the  school 
for  training,  we  continuing  to  pay  his  salary  while  he  is  in 
the  period  of  preparation.  Of  course  if  he  fails  to  pass  the 
educational  course  his  services  are  discontinued. 
"So  far  as  the  value  of  a  college  training  is  concerned,  I  am 
not  prepared  to  make  any  definite  statement,  as  very  few  of 
our  representatives  are  college  men,  and  the  few  that  are  do 
not  enjoy  any  better  positions  than  those  who  have  not  had 
such  advantages. 

"Practically  all  of  the  employees  of  the  Export  Company  in 
executive  positions  are  old  employees  of  the  Domestic  Com- 
pany, having  grown  up  with  the  company  and  been  with  it 
from  ten  to  twenty  years. 

".Any  new  men  that  we  have  taken  on  have  been  chosen  for 
positions  more  because  of  their  particular  knowledge  of  the 
positions  in  which  we  wished  to  place  them  than  from  any 
thought  as  to  whether  they  had  or  had  not  a  college  educa- 
tion." 

United  States  Steel  Corporation,  New  York  City. 

"Our  United  States  Steel  Products  Company  have  had  in  force 
for  a  year  or  more  a  foreign  service  class  for  training  am- 


EXPORT  SALES  FORCE  401 

bitious  and  promising  young  men  who  are  in  the  employ  of 
the  company,  for  foreign  offices.  There  are  always  a  number 
of  men  undertaking  this  course  for  various  lengths  of  time 
as  circumstances  or  immediate  necessity  permit,  by  which  they 
progress  through  the  various  sales,  shipping  and  financial 
divisions  of  the  New  York  office. 

"This  training,  in  many  instances,  is  supplemented  by  an 
especially  routed  trip  through  some  of  our  mills  where  goods 
are  manufactured. 

"In  this  course,  they  have  included  men  whom  they  have 
employed  because  of  their  special  qualifications  in  knowledge 
of  foreign  languages,  or  in  technical  or  engineering  training 
— for  posts  where  this  was  imperative,  and  among  them  have 
been  numerous  college  graduates;  but  such  college  training 
is  not  necessary  and  they  have  always  given  preference  to 
their  own  men  of  good  education,  appearance  and  address,  who 
have  shown  proper  application  and  promise  as  well  as  to 
those  men  already  employed  in  our  subsidiary  companies  who 
have  had  mill  training  or  experience  in  selling  mill  products. ' ' 

In  pursuance  of  its  plan  to  start  on  its  own  account  the 
training  of  men  for  foreign  work,  the  company  has  pro- 
posed starting  a  class-room  course  consisting  of  ap- 
proximately 40  lectures  with  correlated  reading  covering 
the  organization  and  general  methods  of  the  company, 
an  outline  of  the  theory  of  business,  banking,  credit,  in- 
struments of  credit  and  collection,  foreign  exchange,  for- 
eign customs  duties  and  tariffs,  an  outline  of  the  theory 
of  accounting,  government  regulations,  and  commercial 
law  in  foreign  countries.  Practically  all  the  men  who  be- 
come candidates  for  this  course  are  graduates  of  techni- 
cal schools  and  have  had  experience  in  the  testing  depart- 
ment of  the  concern.  Some  of  the  men  have  taken  courses 
in  advanced  engineering  and  have  had  some  business 
training  in  which  the  company  has  borne  about  half  the 
necessary  fees  for  the  courses.  It  is  proposed  to  start 
also  courses  in  Spanish  and  French. 

Should  the  plan  be  adopted!  What  modifications  should 
be  suggested? 


402    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  101 

Thompson   Paint   Company — Methods   of   Paying  Foreign 

Salesmen 

In  order  to  reduce  oi)eratiiig'  expenses  and  secure  more 
efficient  results,  the  Thompson  Paint  Company  is  con- 
sidering changing  the  present  method  of  paying  its  for- 
eign salesmen.  The  working  out  of  a  satisfactory  method 
for  compensating  foreign  representatives  has  been  found 
to  be  rather  difficult ;  the  work  of  a  foreign  salesman  can- 
not be  closely  supervised,  he  must  be  left  to  operate  on 
his  own  initiative  to  a  large  extent,  and  he  must  perform 
several  different  functions.  In  addition  to  making  sales 
the  foreign  representative  of  the  Thompson  Paint  Com- 
pany is  not  infrequently  called  upon  to  demonstrate  the 
uses  of  his  product,  perform  missionary  work  in  introduc- 
ing his  line  to  new  dealers,  and  make  adjustments  on 
damaged  shipments. 

At  present  this  firm  is  paying  its  foreign  salesmen  all 
expenses  and  a  salary  averaging  about  $4,500  a  year.  If 
a  representative  is  single  he  may  receive  as  low  as  $3,600, 
but  a  married  man  often  receives  from  $5,000  to  $7,000  a 
year.  Since  a  salesman's  usefulness  does  not  reach  its 
highest  point  until  he  has  been  in  his  territory  for  a  year 
or  a  year  and  a  half,  the  company  sends  a  man  abroad 
under  a  contract  for  a  period  of  never  less  than  two  nor 
more  than  three  years,  at  the  end  of  which  time  he  comes 
back  for  a  six  months'  vacation.  If  a  man  has  been 
assigned  to  a  tropical  country,  the  firm  arranges  to  have 
his  vacation  in  the  United  States  occur  during  the  winter 
months  in  order  to  give  him  a  change  of  climate.  At  this 
time  salary  adjustments  are  made  and  a  new  contract 
signed  for  another  period. 

A  possible  solution  is  to  pay  salesmen  solely  on  a  com- 
mission basis.  Since  expenses  are  paid  by  the  company, 
all  commissions  earned  are  practically  clear.  By  compen- 
sating foreign  salesmen  with  a  commission  based  upon  a 
percentage  of  n^et  sales,  the  company  assures  itself  of  pay- 


EXPORT  SALES  FORCE  403 

ing  only  for  actual  results.  It  is  not  probable,  however, 
that  a  man  can  be  induced  to  take  up  the  sale  of  Thomp- 
son paints  on  a  commission  basis  in  a  foreign  countrj^ 
when  he  knows  that  he  cannot  expect  to  reach  his  maxi- 
mum stride  until  he  has  been  in  that  country  for  at  least 
a  year.  Even  from  the  standpoint  of  the  company,  com- 
pensating salesmen  solely  on  a  commission  basis  is  not 
wholly  advantageous,  for  emphasis  is  put  entirely  on 
sales  and  little  attention  is  given  to  the  need  for  dem- 
onstrations, missionary  work,  and  calls  upon  dealers  from 
whom  no  immediate  orders  can  be  expected  but  who  may 
be  induced  to  give  information  concerning  the  policies  of 
competitors. 

Another  method  intended  to  offset  the  evils  of  paying 
foreign  salesmen  on  a  straight  salary  or  a  straight  com- 
mission basis  is  a  compromise  between  the  two.  The 
salesman  is  paid  a  commission  on  all  sales  which  he 
makes,  and  in  addition  a  small  salary  to  cover  his  per- 
formance of  functions  which  may  not  result  in  immediate 
sales  but  which  are  nevertheless  building  up  good-will  for 
the  firm.  The  Thompson  Paint  Company  regards  this 
plan  more  favorably  than  paying  a  salesman  on  a  straight 
commission  basis;  but  this  method  also,  has  its  disad- 
vantages, since  increased  earnings  depend  entirely  upon 
increased  sales,  and  the  company's  representative  is  still 
liable  to  give  undue  emphasis  to  immediate  results. 

The  last  method  under  contemplation  is  a  modified 
task  and  bonus  system.  The  expenses  of  the  foreign 
salesman  are  paid  by  the  company  as  before,  but  his 
compensation  depends  not  only  upon  a  commission  on 
all  sales  but  also  upon  the  payment  of  a  small  fee  for 
each  duty  which  he  performs.  The  exact  rates  of  pay- 
ment have  not  as  yet  been  determined,  but  for  the  pur- 
pose of  analyzing  the  plan,  the  company  is  considering 
paying  its  foreign  representatives  on  this  basis : 

Each  call  $  .25 

Each  demonstration  .50 

Each  adjustment  at  the  rate  of 

an  hour  for  time  consumed  1.00 

Each  sale  5%  commission 


404    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Thus  in  a  new  territory  where  sales  are  small  a  sales- 
man will  be  able  to  earn  a  living,  yet  the  company  will 
be  paying  only  for  the  work  actually  done  in  its  behalf. 
Although  this  plan  might  work  admirably  in  large  cen- 
ters Hke  Mexico  City,  Buenos  Aires,  or  Rio  de  Janeiro, 
in  smaller  towns  a  salesman  would  be  able  to  make  but 
few  calls  per  day.  There  is  also  the  temptation  for  the 
dishonest  or  weak  salesman  to  report  calls  as  demon- 
strations or  to  report  calls  which  he  did  not  make. 


Problem  102 
Sandock  Company— Pay  of  Salesmen 

The  cost  of  living  varies  considerably  in  the  cities  in 
which  the  Sandock  Company  maintains  foreign  sales 
branches,  including  Buenos  Aires,  Rio  de  Janeiro,  Mex- 
ico City,  Havana,  Shanghai,  Tokio,  Lyons,  Milan,  Copen- 
hagen, and  London.  In  most  foreign  countries  social 
standing  is  of  great  importance  and  it  is  necessary  that 
the  company's  salesmen  "live  as  white  men"  and  attend 
the  same  social  functions  as  their  customers.  The  sal- 
ary of  each  of  the  company's  foreign  salesmen  is  there- 
fore set  at  a  figure  sufficient  to  enable  him  to  live  as  a 
gentleman  in  the  cit}''  in  which  he  is  located. 

Recently  the  salesman  in  Argentina  asked  to  be  trans- 
ferred to  Mexico  City,  where  a  number  of  his  friends  had 
secured  assignments  with  other  companies.  Mexico  had 
been  his  first  foreign  territory  and  this  salesman,  conse- 
quently, had.  a  large  acquaintanceship  among  the  com- 
pany's old  customers.  The  salesman  in  Mexico  had  the 
wanderlust  and  was  equally  anxious  to  make  the  change. 
Since  both  these  men  were  experienced  foreign  travelers 
who  had  been  in  the  employ  of  the  company  for  a  number 
of  years,  the  request  was  granted. 

Because  the  cost  of  living  was  greater  in  Buenos  Aires 
than  in  Mexico  City,  however,  it  was  necessary  to  raise 
the  salary  of  the  man  who  was  transferred  to  the  former 


EXPORT  SALES  FORCE  405 

city.  On  the  other  hand,  the  Buenos  Aires  salesman  had 
been  receiving  a  high  salary  for  a  considerable  length  of 
time  and  it  did  not  appear  ad\dsable  to  reduce  his  salary 
when  he  was  sent  to  Mexico  City,  where  the  cost  of  living 
was  less.  By  paying  the  same  salary  in  Mexico  that  was 
paid  in  Argentina,  the  company  was  establishing  a  dan- 
gerous precedent  which  might  cause  difficulty  when  sales- 
men were  sent  there  in  the  future. 

Similar  instances  have  occurred  in  the  past  in  other 
countries.  It  is  proposed  therefore  that  the  company 
base  the  salary  of  its  foreign  salesman  on  his  worth  and 
length  of  service,  the  difference  in  the  cost  of  living  in 
the  various  countries  to  be  taken  care  of  by  a  "living 
and  expense  allowance. "  Under  these  conditions  a  sales- 
man could  be  transferred  from  Buenos  Aires  to  Mexico 
City  or  from  Lyons  to  Milan  without  changing  his  sal- 
ary, his  living  and  expense  allowance  only  being  changed 
to  meet  the  new  conditions. 

A  number  of  objections  have  been  raised  to  this  plan. 
The  salesmen  of  the  Sandock  Company  are  all  experi- 
enced men,  who  would  undoubtedly  object  to  reductions 
in  salary  for  adjustment  where  establishing  allow- 
ances. If  the  salaries  are  maintained  at  their  present 
level  it  would  be  expensive  for  the  company  to  make  an 
additional  allowance  to  cover  the  cost  of  living  in  the 
different  countries.  Furthermore,  since  salesmen  fre- 
quently like  to  tell  their  friends  that  they  are  receiving 
large  salaries,  it  is  quite  possible  that  even  new  sales- 
men would  not  look  with  favor  upon  such  an  arrangement. 

Should  the  Sandock  Company  adopt  the  proposed  pol- 
icy of  paying  its  foreign  salesmen? 


406    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  103 

Morse  Paper  Co. — Export  Salesmen — Advance  Territory 

Work* 

In  introducing  its  line  of  paper  novelties  into  Argen- 
tina the  Morse  Paper  Company  had  followed  the  prac- 
tice of  sending  a  salesman  on  a  preliminary  trip  for  the 
purpose  of  getting  acquainted.  On  this  first  trip  the 
salesman  was  not  expected  to  do  much  business  but  rather 
to  lay  the  foundation  for  future  trade.  He  was  in- 
structed to  look  over  the  field,  meet  prospects,  and  ex- 
plain his  line  of  goods  consisting  of  paper  tags  and  crepe 
paper  used  for  decorative  purposes. 

In  1921  the  traveling  expenses  of  export  salesmen  in- 
creased, averaging  between  $18  to  $20  daily.  This  did 
not  include  entertainment,  commercial  travelers'  license 
fees,  excess  baggage,  and  duties  on  samples.  It  was  not 
uncommon  for  a  salesman  to  average  $25  a  day,  not  in- 
cluding any  emergencies  such  as  long  motor  trips  be- 
cause of  disabled  rail  or  water  transportation.  Based  on 
the  $25  average  the  export  salesman  represented,  apart 
from  salary,  an  expenditure  of  $7500  on  a  three  hundred 
days'  trip  each  year. 

In  1921  the  company  was  contemplating  a  sales  cam- 
paign in  the  countries  on  the  west  coast  of  South  Amer- 
ica. The  distribution  manager,  in  order  to  curtail  ex- 
penses, suggested  an  entirely  new  method  of  entering 
the  field  which  would  postpone  the  preliminary  trip  of 
the  salesman  for  one  year  until  the  field  had  been  prop- 
erly prepared.  His  suggestions  were  outlined  in  the  fol- 
lowing plans : 

''First  of  all,  the  general  territory  to  which  the  sales- 
man is  to  be  sent  should  be  carefully  studied.  The  ser- 
vice of  export  institutions  and  journals  should  be  enlisted 
in  preparing  the  salesman's  itinerary  and  in  determining 
the  time  which  should  be  spent  in  each  city.  By  this  care- 
ful examination  of  the  territory  it  might  be  found  ad- 
visable to  lay  out  side  trips  from  the  leading  cities  and 

*See  Wyman,  Export  Merchandising;  also  The  World's  Markets  for 
May  1919,  p.  14;  and  Export  Trade  for  Oct.  1,  1921,  p.  21. 


EXPORT  SALES  FORCE  407 

to  have  the  salesman  make  trips  into  the  interior  towns 
that  are  seldom  visited.  These  alone,  in  many  cases  mth 
which  I  am  familiar,  have  yielded  sales  at  profits  which 
more  than  cover  the  cost  of  preparing  the  entire  field  for 
the  salesman. 

"When  the  cities  and  towns  have  been  decided  upon  w^e 
should  compile  two  mailing  lists.  The  first  would  include 
the  names  of  all  dealers  who  are  in  lines  that  indicate  a 
strong  probability  that  they  might  be  engaged  in  the  re- 
sale of  products  of  the  same  general  nature  as  those  of 
our  company.  The  second  list  would  contain  only  the 
names  of  the  biggest  and  best  firms  in  the  territory.  In 
order  to  be  in  the  right  position  for  effective  correspond- 
ence, we  would  buy  credit  reports  on  all  names  on  this 
second  list. 

*'A  year  before  the  salesman's  visit  we  would  start 
our  'field  preparation  campaign'  with  a  series  of  mailing 
cards.  These  cards  would  be  handsomely  printed,  show- 
ing our  leading  products  in  their  natural  colors.  These, 
on  their  face,  would  be  an  indication  of  size  and  expe- 
rience, since  in  language,  text  and  layout  it  would  be  clear 
that  they  were  the  work  of  experts.  The  series  would 
consist  of  twelve  bulletins,  mailed  at  two-week  intervals. 
One  of  these  bulletins  would  feature  our  several  fac- 
tories, showing  in  a  striking  way  the  immense  number  of 
employees.  Other  cards  would  show  window  displays  of 
our  products  in  out-of-the-way  cities  of  the  world,  as  well 
as  on  the  broadest  avenues  of  the  largest  cities  of  the 
world. 

"Six  months  before  the  salesman's  trip  we  would  mail 
very  carefully  worded  letters  in  two  series.  The  first  of 
the  series  would  be  a  general  letter  going  to  the  large  list, 
from  which,  of  course,  the  names  of  the  elect  had  been 
removed.  The  second  of  the  series  would  consist  of  in- 
dividual letters  based  on  information  contained  in  the 
credit  reports  previously  mentioned.  While  these  letters 
would  make  it  possible  for  the  recipients  to  make  pur- 
chases and  a  strong  eft'ort  would  be  made  to  secure  at 
least  one  customer  in  each  city,  the  main  object  of  the 


408     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

series  would  be  to  make  our  representative  a  welcome 
visitor  later  on. 

'' During  the  six  months'  period  advertising  for  tlie  ex- 
port business  would  be  carried  on  in  two  ways.  In  export 
journals  the  salesman's  trip  would  be  advertised,  showing 
by  means  of  outline  maps  the  salesman's  routes  and  the 
approximate  dates  that  he  would  be  in  each  city.  Re- 
prints of  these  advertisements  would  be  used  for  en- 
closures in  the  letter  series.  The  second  use  of  export 
advertising  would  be  in  the  local  newspapers  in  the  cities 
which  the  traveler  was  to  visit.  These  advertisements 
would  feature  the  goods  and  the  company  rather  than 
the  salesman,  but  would  include  a  few  well  worded  lines 
and  a  head-and-shoulders  cut  of  the  salesman. 

''The  final  letter  in  each  series  would  bespeak  a  wel- 
come for  the  salesman.  It  would  be  timed  to  arrive  on 
the  same  mail  as  the  salesman's  advance  card,  which 
would  be  dignified  but  not  cold  and  which  would  show  a 
naturally  posed  photographre  likeness  of  the  saleman. 
This  final  letter  and  the  salesman's  advance  card  would 
be  timed  to  reach  the  dealer  not  more  than  two  weeks 
before  the  salesman. 

"While  it  would  be  impossible  to  figure  the  actual  cost 
of  this  preparation  for  any  given  market  for  the  purpose 
of  illustration  here,  it  mil  be  found  that  this  method  of 
preparing  the  field  will  probably  cost  OTie-fifth  to  one- 
quarter  as  much  as  a  salesman's  trip.  It  will  be  found 
that  the  salesman  will  be  greeted  on  his  first  trip  with  all 
the  cordiality  that  the  average  foreign  traveler  receives 
on  his  second  trip. 

"The  order  will  prove  the  value  of  the  field  prepara- 
tion." 

Should  the  Morse  Paper  Company  have  sent  salesmen 
to  the  west  coast  of  South  America  immediately  or  should 
it  have  prepared  the  field  for  one  year  in  advance? 


EXPORT  SALES  FORCE  409 

Problem  104 
Wadsworth  Company — Equipment  of  Foreign  Salesmen* 

The  Wadsworth  Company,  a  cotton  textile  selling 
house,  has  never  given  much  attention  to  the  standardi- 
zation of  instructions,  equipment  and  supphes  for  its 
foreign  salesmen.  Most  of  its  representatives  are  ex- 
perienced men  who  have  already  traveled  in  the  countries 
to  which  they  are  being  sent ;  the  younger  men  on  their 
initial  trips  are  usually  advised  by  the  older  salesmen 
as  to  what  they  should  take  with  them  and  are  given  a 
course  of  instruction  before  they  are  sent  out.  The  com- 
pany usually  furnishes  each  representative  Avith  price 
lists,  catalogs,  order  blanks,  samples,  the  names  of  pre- 
vious customers,  and  a  letter  of  credit  to  the  foreign  bank 
through  which  the  salesman  is  to  receive  his  funds.  The 
export  manager,  of  course,  keeps  in  touch  with  his  men 
by  mail  and  by  cable.  Little  attention  has  been  given 
toward  standardizing  the  equipment  that  each  salesman 
should  have. 

Instances  have  occurred  in  which  salesmen  of  the 
Wadsworth  Company  sent  to  the  Far  East  were  put  to 
considerable  inconvenience  because  they  were  unable  to 
show  customers  credentials  as  to  their  authority  to  rep- 
resent their  firm.  At  other  times  the  company's  repre- 
sentatives have  offended  wealthy  American  customers 
by  being  forced  to  decline  invitations  to  social  activities 
because  they  did  not  carry  the  proper  formal  dress. 
Other  instances  of  a  similar  nature  have  occurred  at  in- 
tervals and  the  export  manager  has  decided  to  eliminate 
this  difficulty  by  establishing  a  standard  equipment  for 
all  foreign  salesmen.  After  consulting  a  number  of  for- 
eign trade  handbooks  and  talking  the  matter  over  with 
some  of  his  salesmen,  the  following  list  of  suggestions 
for  equipment  has  been  made : 

For  furtlier  information  upon  tlie  equipment  of  salesmen,  cf.  Filsinger, 
Commercial  Traveler's  Handboolc  for  Latin  A7nerica;  Hough,  Practical 
Exporting,  pages  182-186;  The  World's  Markets,  July  1921,  p.  17— "Ex- 
porting Salesmen";  and  Export  Trade  &  Exporters'  Review,  July  10, 
1920,  p.   10— "First  Aid  for  Colombian   Travelers." 


410     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Passport:  Although  not  needed  in  all  countries,  passports 
provide  an  easy  and  sure  means  of  identification  and  often  assist 
the  salesman  in  escaping  Government  red  tape. 

Wardrobe :  Salesmen  should  receive  instructions  as  to  weight 
of  clothing  and  type  best  suited  to  the  country  to  which  he  is 
being  sent.  Particular  attention  should  be  given  to  dinner  and 
evening  clothe^s  for  salesmen  covering  Latin- American  and  other 
countries  where  social  intercourse  is  an  important  factor. 

Instructions  on  Health :  A  sick  salesman  is  a  very  expensive 
representative  of  the  company.  All  foreign  representatives 
should,  therefore,  have  instructions  as  to  the  kinds  of  fruit  to 
be  avoided  in  the  tropics,  the  dangers  of  contracting  malaria  and 
other  diseases  usually  transmitted  through  the  sting  of  a  mos- 
quito or  other  insect,  the  effects  of  high  elevations,  and  the 
dangers  from  Avater  supply. 

Red  Cross  First-aid  Outfit:  Salesmen  should  carry  simple 
remedies  for  illness  and  minor  injuries. 

Inoculation  and  Vaccination:  Because  of  the  dangers  from 
traveling  and  poor  living  conditions,  all  salesmen  should  be 
inoculated  against  typhoid  and  vaccinated  against  smallpox. 

Letters  of  Author  it  ij:  All  salesmen  should  carry  letters  stat- 
ing their  exact  power  and  showing  whether  or  not  they  have 
the  power  to  appoint  agents,  etc. 

Letters  of  Liynited  Authority  :  To  aid  them  when  dealing  with 
foreign  customers,  who  may  demand  varying  credit  terms  or 
special  concessions,  letters  showing  their  limited  authority  should 
be  carried  by  the  salesmen. 

Power  of  Attorney :  It  is  frequently  of  great  help  to  an  ex- 
perienced salesman  to  be  given  the  power  of  attorney  to  enable 
him  to  make  adjustments  in  the  name  of  the  company  and  to 
act  with  authority  in  case  of  dispute.  This  authority,  however, 
should  not  be  given  a  young  salesman  or  a  man  who  has  not 
proved  himself  thoroughly  capable  and  reliable. 

Copies  of  Confidential  Correspondence :  Copies  of  important 
correspondence  assist  the  salesman  in  adjusting  disputes  or  in 
pacifying  irate  customers  and  at  the  same  time  avoid  involving 
the  company  in  complications. 

Mailing  Schedule:  Mailing  schedules  should  be  cjgreed  upon 
in  order  to  keep  salesmen  in  close  touch  with  the  comi)any  and 
make  it  possible  for  them  to  receive  letters  and  instructions  with 
the  least  possible  delay.  The  company  should  be  advised  by  the 
salesmen  by  cable  of  any  changes  in  these  mailing  schedules, 
since  the  delay  of  important  letters  might  mean  that  the  value 
of  the  trip  was  practically  wasted. 

Ample  Money  to  Coiner  all  Expenses  :  Sufficient  money  should 
be  available  at  all  times  to  every  salesman.     There  is  nothing 


EXPORT  SALES  FORCE  411 

which  injures  the  reputation  of  the  company  and  embarrasses 
a  salesman  so  much  as  to  be  compelled  to  turn  to  friends  or 
customers  for  finaucial  aid.* 

Copies  of  Important  Documents:  Salesmen  should  be  sup- 
plied with  copies  of  all  important  documents  such  as  contracts 
for  the  appointment  of  agents,  sales  policies,  and  terms. 

Letters  of  Introduction :  Special  letters  of  introduction  to 
rating  agencies  and  banks  should  be  given  the  salesmen  to  help 
them  secure  special  credit  information  of  value  to  the  company 
in  passing  on  the  orders  of  customers. 

Credit  Blanks :  Standard  forms  should  be  drawn  up  by  the 
company  for  recording  special  confidential  credit  information 
on  a  customer  secured  by  the  salesman  from  other  merchants 
in  his  town. 

Instruction  Book :  An  instruction  book,  both  in  English  and 
in  the  language  of  the  country  in  which  the  salesmen  are  travel- 
ing, should  be  prepared  in  order  to  make  sure  that  there  is  no 
mistake  in  regard  to  such  technical  details  as  insurance  on  mer- 
chandise sold,  the  terms  which  must  be  agreed  upon,  and  the 
other  obligations  which  the  company  or  customer  assumes. 

Catalog  of  Product :  Salesmen  should  be  provided  with  cata- 
logs describing  their  company- 's  product  both  in  English  and  in 
the  language  of  the  country  visited ;  measurements  and  other 
specifications  in  this  catalog  should  be  listed  both  in  English 
and  in  the  metric  system  in  order  to  assist  in  figuring  customs 
duties  and  other  items. 

Private  Code :  All  salesmen  should  have  a  copy  of  the  com- 
pany's  private  code  to  enable  them  to  report  confidential  infor- 
mation without  danger  of  revealing  the  facts  to  competitors  or 
others. 

Collect  Card :  Every  salesman  should  be  given  a  collect  card 
by  means  of  which  he  can  have  cablegrams  sent  collect,  thus 
making  it  unnecessary  for  him  to  carrj^  additional  amounts  of 
money  for  this  expense.  This  also  enables  the  company  to  check 
up  on  the  payments  for  cablegrams  and  secure  any  reductions 
that  may  be  allowed. 

Samples  :  Salesmen 's  samples  should  be  carried  in  several  lots, 
so  that  if  necessary  they  can  leave  one  lot  with  the  customer 
for  a  few  days  while  they  call  on  other  customers. 

*If  export  salesmen  intend  to  spend  a  number  of  months  in  a  particular 
locality,  it  is  customary  to  open  up  a  special  credit  in  some  of  the  banks 
under  arrangements  whereby  the  salesman  can  draw  a  certain  amount 
each  month.  If  salesmen  are  spending  comparatively  short  periods  at 
each  point,  they  may  be  provided  with  a  circular  letter  of  credit  the  form 
of  which  is  usually  much  as  is  shown  in  Forms  11  and  12  on  pages  412  and 
413.     See  page  414  for  continuation^  of  this  footnote. 


412    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


The  Export  Bank 

CIRCULAR  LETTER  OF  CREDIT 

No. $ 


livston.  Muxs.,  U.  S.  A 19 

To  Our  Conrspuudtiits: 
Dear  Sirs: 

Wc  bey  to  introduce  to  you  and  to  commend  to  your  courtesy 

M . 

in  ivhose  favor  loe  have  opened  a  credit 

of .  Dollars  U.  S.  Currency 

and  whose  drafts  to  that  extent,  at  sight,  upon 

The  Export  Bank 

ive  engage  shall  meet  with  due  honor  if  negotiated  not  later  than 

19 

Each  draft  viust  be  marked,  "DRAW^  AGAINST  THE  EXPORT  BANK 

LETTER  OF  CREDIT  No. ''"'signed  inyour presence andthe payment 

endorsed  hereon.  I'our  negotiation  of  any  draft  will  be  considered  a 
guarantee  Uiat  the  foregoing  has  been  done.  This  letter  rnust  be 
attached  to  the  last  draft  drawn.  Your  charges,  if  any,  are  to  be  paid 
by  the  holder,  whose  signature  appears  in  our  Letter  of  Indication 
bearing  the  same  date  and  number  as  this  Credit. 

Wc  are.  Dear  Sirs, 

Respectfully  Yours, 
THE  EXPORT  BANK 


VlCEPRKSIDENt 


MANAGKH  K)Ki;i(.N   DKl'AltTMKNT 
A.SSIST.V.\T  CASHIER 


FORM  11.  Circular  Letter  of  Credit,  Front— See  footnote  on  page  411 


EXPORT  SALES  FORCE 


413 


Selection  of  Samples:  Salesmen's  samples  should  be  carefully 
selected  with  special  reference  to  colors  and  patterns  most  pleas- 
ing to  the  eye.  Samples  on  which  there  is  a  large  difference  of 
opinion  as  to  their  salability  should  not  be  included ;  they  may, 
however,  be  described  in  the  catalog. 

Brushes :  Brushes  should  be  included  in  the  sample  cases  so 
that  the  contents  can  be  kept  free  from  lint  and  will  appear 
fresh  for  the  examination  of  each  customer. 

Small  Typewriter :  Each  salesman  should  carry  a  small  type- 
writer for  convenience  in  handling  correspondence  both  with 
the  company  and  with  customers. 
Stationery :  This  should  include: 

Personal  stationery  for  acknowledgment   of   social   obliga- 
tions and  personal  letters. 

Advertising  matter — booklets  of  the  mills  with  illustrations 
of  the  product.    Preliminary  copies  of  advertising. 
Business  stationery. 
Personal  cards. 
Business  cards. 

Preliminary  report  blanks,  which  the  salesman  can  use  in 
making  out  the  order  in  the  customer's  office. 

Regular  report  blanks  giving  full  and  complete  details  for 
the  order. 

Address  book. 
Expense  book. 
Letters  of  Introduction:  The  salesman  should  carry  general 
letters  of  introduction  to  consuls,  commercial  attaches,  banks, 


PAYMENTS 

EACH  DRAFT  NEGOTIATED  UNDER  THIS  CREDIT  MUST  BE  ENDORSED  BELOW 

DATE 
WHEN  PAID 

PAID  BY 

NAMEOF 
CITY 

AMOUNT  IN  WORDS 

AMOUNTIN 
FIGURES 

$ 
CUF 

US 

REr 

CY 

1 — 1 



FORM  12.  Circular  Letter  of  Credit,  Reverse — See  footnote  on  page  411 


414    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

credit  houses,  important  customers,  and  export  associations. 
Although  these  letters  may  not  be  used,  frequently  the  conveni- 
ence and  assistance  rendered  by  one  or  two  makes  them  valuable 
accessories  to  a  salesman's  equipment. 


Letters  to  ProsiJCcts :  In  order  to  shorten  the  time  required 
to  make  a  sale  letters  to  prospects  should  be  sent  out  ahead  of 
the  salesman  explaining  his  visit.  Salesmen  should  be  provided 
with  these  letters  to  send  out  ahead  of  their  visits. 

^Continuation  of  footnote  from  page  411 : 

Accompanying  the  letter  of  credit  is  a  letter  of  indication,  which  serves 
as  an  identification  for  the  salesman  when  he  attempts  to  draw  funds 
upon  the  letter  of  credit: 


FORM  13.  Letter  of  Indication 


EXPORT  SALES  FORCE  4,15 

List  of  Customers : 

(a)  Tried  customers  whose  credit  is  0.  K. 

(b)  Customers  whose  credit  standing  should  be  investigated 
by  the  salesman. 

(c)  Prospective  customers,  with  details  as  to  size  of  busi- 
ness, etc. 

Customers'  sheets  should  be  given  to  the  salesmen  showing  the 
amounts  which  each  of  their  customers  has  purchased  in  the 
past,  the  promptness  with  which  he  has  made  payment,  and 
the  terms  under  which  he  can  be  sold. 

Which  of  these  suggestions  should  the  Wadsworth 
Company  include  in  the  equipment  of  its  foreign  sales- 
men? 

Should  anv  other  items  be  added  f 


Problem  105 

The  Volk  Paint  Company — Cooperation  of  the  Export  and 
Other  Departments  with  Foreign  Salesmen 

In  the  final  analysis,  it  is  the  consensus  of  opinion  of 
the  heads  of  the  sales  department  that  one  of  the  biggest 
reasons  for  the  Volk  Paint  Company's  failure  to  secure 
the  greatest  returns  from  the  foreign  field  has  been  the 
lack  of  cooperation  of  the  export  department  with  its 
salesmen.  The  export  manager  had  traveled  but  little 
in  Latin  America,  yet  he  tried  to  advise  salesmen  on 
points  on  which  he  did  not  have  first-hand  information. 
Suggestions  from  his  representatives  in  this  field  were 
ignored  unless  they  happened  to  meet  with  his  hobby  or 
preconceived  ideas.  Under  these  conditions  it  is  no  won- 
der that  the  salesmen  became  discouraged  and  grew  lax 
and  indifferent  toward  their  work. 

The  former  export  manager  has  resigned  and  a  new 
one  has  been  secured  whose  knowledge  of  conditions  in 
Latin  America  comes  from  personal  contact  as  salesman 
in  the  field.  This  new  man  intimates  that  if  he  is  to  have 
his  way  the  company  must  face  squarely  round  and  do 


416    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

everything  in  its  power  to  help  its  foreign  salesmen.  Not 
only  must  the  export  department  cooperate  in  every  way, 
but  all  the  other  departments  in  the  plan  mnst  do  like- 
wise. If  a  salesman  sends  in  an  advertising  suggestion 
as  to  the  particular  appeal  that  is  securing  results  in  his 
territory,  his  suggestion  should  be  complied  with,  no 
matter  what  the  officials  of  the  company  may  think,  for 
the  salesman  is  on  the  ground  and  knows  the  true  condi- 
tions, while  the  men  at  the  home  office  are  familiar  with 
only  the  domestic  market.  Likewise,  if  a  special  order  is 
sent  in  with  unusual  specifications,  the  production  de- 
partment should  comply  with  it  no  matter  if  the  costs 
run  so  high  that  it  fails  to  make  a  profit.  It  may  hav*,' 
cost  the  company  $75.00  in  salesman's  salary  and  expense 
to  get  this  order  and  the  production  department  should 
not  throw  away  this  money  and  the  chance  of  some  day 
building  up  a  profitable  business  with  this  customer  by 
refusing  to  sacrifice  a  dollar  or  two  on  the  first  order. 
Export  orders  should  receive  the  right  of  way  over  do- 
mestic orders  because,  although  railroad  cars  can  be 
secured  every  day,  a  ship  for  a  distant  South  American 
port  may  sail  but  once  a  month,  and  the  resulting  delay 
and  poor  service  may  result  in  the  loss  of  this  customer's 
future  business.  It  should  be  the  duty  of  the  export 
department  to  back  up  its  salesmen,  write  encouraging 
letters,  act  as  a  go-between  with  the  export  salesmen  and 
the  other  departments  of  the  company,  and  in  every  way 
make  the  foreign  representative  feel  that  he  is  being 
actively  supported  in  everything  he  undertakes. 

The  heads  of  the  other  sales  departments  are  inclined 
to  consider  this  view  as  extreme  and  advise  modifying 
the  export  manager's  plan.  Because  this  company  has 
erred  in  one  extreme  is  no  reason  why  it  should  now  make 
the  same  mistake  in  the  opposite  direction.  These  men 
say  it  would  be  foolish  for  the  company  to  try  to  cooper- 
ate on  all  the  advertising  and  selling  schemes  the  average 
salesman  recommends,  since  he  is  too  close  to  the  con- 
ditions in  his  territory  to  get  a  broad  view  of  the  needs  of 
the  company  as  a  whole.    If  the  export  manager  had  his 


EXPORT  SALES  FORCE  417 

way,  these  men  say,  it  would  not  be  long  before  the  entire 
company  would  practically  be  taking  orders  from  the 
foreign  sales  force ;  and  as  for  giving  right  of  way  to 
foreign  shipments,  they  are  unable  to  see  any  reason  why 
foreigners  should  not  be  compelled  to  take  their  turn 
with  American  customers,  many  of  whom  have  dealt  with 
the  firm  over  a  long  period  of  years. 

To  what  extent  can  the  different  departments  cooper- 
ate with  the  foreign  sales  force  of  the  Volk  Paint  Com- 
pany? 


Problem  106 

Kagan  Company — Handling  of  Salesmen* 

The  Kagan  Company  is  attempting  to  increase  its 
foreign  sales  in  Latin  America.  This  firm  manufactures 
fountain-pen  and  drawing  inks,  and  mucilage  and  glue 
put  up  in  small  containers  for  desk  use.  It  has  exported 
its  products  to  Europe  through  its  own  salesmen,  who  are 
natives  of  the  country  in  which  they  sell.  In  Latin 
America  preliminary  trips  b}^  travelers  have  convinced 
the  company  that  there  is  a  large  potential  market  in 
these  countries  for  its  products.  The  territory  has,  con- 
sequently, been  subdivided  into  the  following  districts 
with  a  route  laid  out  in  each  district  requiring  from  four 
to  six  months  to  cover: 

Eastern  Coast  of  Brazil 
River  Platte  region 
West  Coast 

*In  addition  to  the  information  to  be  found  in  Hough,  Practical  Ex- 
porting, Chap.  VI;  and  Wyinan,  Export  Merchandising,  the  following 
periodical  references  reveal  points  of  interest  in  connection  with  the  han- 
dling of  salesmen: 

Sales  Management. 

Dee.  1919,  p.  100— "Pitfalls   Tliat   Await  Your  Salesmen  Abroad." 

Export    Trade  and  Exporters'   Review. 

Feb.  19,   1921,  p.  5— "Special  Private  Cable  Codes." 

Apr.  30,  1921,  p.  66— "  The  Export  Salesman's  Return." 

Dec.  3,  1921,  p.  5— "Making  the  Most  of  a  Residence  Abroad." 


418    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Northern  Coast  and  Central  America 

Mexico 

West  Indies 

The  question  which  the  Kagan  Company  is  now  fac- 
ing is  whether  to  bring  the  salesman  back  to  the  factory 
for  a  short  period  after  completing  each  trip,  or  to  leave 
him  in  the  territory  for  a  period  of  two  or  three  years. 

The  policy  of  bringing  the  salesmen  back  to  the  factory 
at  the  end  of  each  four  or  six  months  period  would  aid  the 
company  in  keeping  in  close  touch  with  the  demands  of 
its  customers  on  the  new  market.  If  in  Mexico  City  there 
was  a  demand  for  paste  put  up  in  special  tubes  with  each 
tube  packed  separately  in  a  bright  colored  carton  instead 
of  being  packed  one  dozen  in  a  box,  it  is  important  that 
the  factory  receive  first-hand  information  of  this  fact. 
The  details  of  these  changes  can  be  presented  personally 
by  the  salesman  to  the  production  department  in  a  much 
more  satisfactory  manner  than  by  letter.  Furthermore, 
by  frequent  visits  to  the  factory  the  salesman  will  be  in- 
formed of  the  new  products  that  the  factory  is  develop- 
ing, which  will  help  him  to  build  up  a  different  story  to  be 
used  on  his  next  trip.  He  can  also  aid  in  straightening 
out  any  mistakes,  misunderstandings,  or  difficulties  that 
may  have  arisen  in  connection  with  his  last  orders.  This 
step  also  enables  the  salesman  to  follow  up  each  order 
personally  so  that  he  can  assure  the  customer  of  the  spe- 
cial care  taken  to  give  satisfactory  service,  thus  securing 
better  coordination  between  the  foreign  sales  and  the  pro- 
duction departments. 

In  the  domestic  market  it  is  the  policy  of  the  Kagan 
Company  to  have  its  salesmen  return  to  the  factory  at 
least  once  or  twice  a  year  for  sales  conferences  and 
instructions  on  new  products.  By  following  the  same 
policy  with  its  foreign  salesmen  it  shouhl  ])e  possible  for 
the  company  to  develop  the  same  degree  of  efficiency  and 
high  morale  now  existing  among  the  salesmen  in  the 
States.  Because  of  living  conditions  and  the  greater  dis- 
tance from  friends  and  relatives,  few  salesmen  care  to 
live  abroad  permanently,  although  many  are  willing  to 


EXPORT  SALES  FORCE  419 

make  trips  to  foreign  countries  if  they  know  that  they 
can  return  regularly  at  the  end  of  four  or  six  months; 
consequently,  such  a  policy  would  make  the  foreign  field 
more  attractive  and  would  help  the  company  in  building 
up  an  efficient,  permanent  sales  force.  This  policy,  how- 
ever, would  be  very  expensive,  since  it  requires  from  two 
weeks  to  a  month  to  make  the  trip  between  Latin  Ameri- 
can territory  and  the  home  office  of  the  Kagan  Company. 
During  this  time  the  salesman  would,  of  course,  be  draw- 
ing his  salary  and  expense  money,  although  he  would 
not  be  able  to  sell  merchandise  or  keep  in  touch  with  the 
conditions  in  his  territory  and  competitors  would  be 
able  to  operate  almost  at  will. 

If  a  salesman  is  sent  to  the  Latin  American  countries 
under  a  two  or  three-year  contract,  as  is  the  policy  of  the 
Standard  Oil  Company  in  sending  men  to  China,  he 
establishes  his  home  and  headquarters  in  a  large  city 
from  which  he  makes  trips  to  surrounding  districts.  This 
practically  makes  him  a  permanent  resident  of  the  coun- 
try to  which  he  is  sent,  at  least  for  the  period  of  two  or 
three  years,  and  he  thereby  becomes  more  familiar  with 
the  customs,  language,  habits,  and  ideas  of  the  people  to 
whom  he  must  sell.  He  is  always  present  to  represent 
the  company,  if  any  difficulties  resulting  from  delaved 
shipments,  adjustments  on  shortages,  and  damaged  goods 
arise.  ^  Foreign  customers  frequently  feel  more  confi- 
dence in  a  man  who  lives  in  their  own  country  and  to 
whom  they  can  appeal  for  assistance  at  any  time  than 
they  do  in  a  man  who  makes  a  hasty  tour  of  his  territory 
to  secure  orders  and  immediately  leaves  for  the  States, 
often  before  they  are  filled.  A  salesman  who  is  kept  in 
South  America  on  a  two  or  three-year  contract,  however, 
IS  not  m  close  touch  with  the  factory  and  is  familiar  with 
new  products  only  through  instructions  by  mail. 

In  the  case  of  English  and  German  firms,  their  sales- 
men are  frequently  willing  to  become  residents  of  the 
country  to  which  they  are  sent.  All  the  salesmen  now  in 
the  employ  of  the  Kagan  Company,  however,  have  inter- 
ests m  the  States  and  are  not  anxious  to  become  perma- 


420    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

nent  residents  of  a  Latin-American  country.  Other 
companies  have  sometimes  found  that  when  such  sales- 
men are  sent  away  under  a  three-year  contract,  they  fre- 
quently refuse  to  remain  with  the  company  at  the  end  of 
that  time  because  they  do  not  care  to  be  away  from  the 
States  for  such  an  extended  period  again. 

What  policy  should  the  Kagan    Company    adopt    in 
handling  its  foreign  sales  force? 


Problem  107 
The  Volk  Paint  Company — Stimulation  of  Sales  Force 

In  the  opinion  of  some  of  the  department  heads  the 
failure  of  the  Volk  Paint  Company's  salesmen  to  secure 
as  large  a  volume  of  orders  in  the  Latin  American  mar- 
ket as  had  been  expected  is  due  to  lack  of  proper  man- 
agement of  the  sales  force  rather  than  to  a  great  need  for 
stimulation  of  sales.  In  the  domestic  field  the  company 
has  always  held  sales  contests  between  the  different 
districts  and  has  developed  a  keen  sense  of  friendly  ri- 
valry that  has  been  reflected  in  rapid  increases  in  the 
sales  volume.  Contests  have  also  been  held  for  individ- 
ual salesmen,  the  winners  being  given  suitable  prizes  or 
bonuses  or  being  made  members  of  the  Star  Salesmen 
Club.  These  department  heads  recommend  that  the 
same  methods,  which  have  been  so  successful  in  the 
domestic  field,  should  be  used  in  Latin  America  in  order 
to  stimulate  the  company's  foreign  salesmen  and  induce 
them  to  put  forth  greater  effort. 

Two  of  the  department  managers  fail  to  see  the  wis- 
dom of  this  policy,  claiming  that  such  a  scheme  would  be 
worse  than  useless  for  it  would  destroy  much  of  the  good 
now  being  done  by  the  sales  force  abroad.  Orders  from 
South  American  customers  depend  upon  friendship  to  a 
large  extent.  This  foreign  market  must,  therefore,  be 
viewed  as  a  long-time  proposition.  Under  no  condition 
should  a  foreign  customer  be  hurried,  particularly  on  the 


EXPORT  SALES  FORCE  421 

salesman's  first  visit,  nor  should  established  customers  be 
urged  to  over-stock  as  might  be  the  case  were  a  salesman 
attempting  to  win  a  contest.  Conditions  vary  so  in  the 
different  territories,  with  their  changing  climates,  differ- 
ent industries,  and  different  paint  needs,  that  it  would  be 
practically  impossible  to  place  all  the  foreign  salesmen 
on  a  comparable  basis.  A  sales  contest  under  these  con- 
ditions would  only  promote  jealousy  and  dissension 
among  the  salesmen  themselves  and  cause  them  to  adopt 
tactics  which  would  result  in  the  loss  of  customers 
later  on. 

In  place  of  a  foreign  sales  contest  these  men  recom- 
mend a  close  follow-up  of  all  foreign  sales  work,  not  only 
by  the  export  manager  but  by  the  president  and  other 
oflficials  of  the  company  as  well.  AVhenever  a  salesman 
succeeds  in  securing  a  particularly  profitable  order  or 
induces  an  important  dealer  to  stock  a  line,  he  should 
be  written  an  encouraging  letter  congratulating  him  on 
his  achievement  and  telling  him  that  the  company  real- 
izes the  hard  work  that  has  preceded  the  order  and  ap- 
preciates the  salesman's  efforts.  If  it  is  possible,  this 
letter  should  be  signed  by  the  president  of  the  firm  in 
order  to  give  it  as  much  prestige  as  possible  and  to  make 
the  salesman  understand  that  his  eff'orts  are  really  being 
watched  not  alone  by  his  immediate  superiors  but  also  by 
the  head  of  the  firm. 

As  is  only  natural  this  plan,  too,  has  its  opposition, 
several  of  the  executive  heads  maintaining  that,  although 
letters  of  this  type  are  all  right  for  a  while,  before  long 
they  produce  dissatisfaction  for  the  salesman  says  to 
himself  ''If  the  company  keeps  thinking  I'm  so  good  and 
wants  to  show  appreciation  of  my  work,  why  doesn't  it 
raise  my  salary  or  do  something  worth  while  instead  of 
sending  me  all  these  letters?"  These  men  who  are  op- 
posed to  the  letter  writing  plan  are  aware  of  the  difficul- 
ties in  the  way  of  establishing  a  quota  in  each  of  the 
foreign  territories  but  they  advise  the  company  to  tell 
each  salesman  that  his  territory  should  produce  definite, 
concrete  results  in  a  year's  time.    If  he  is  able  to  increase 


422     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

his  sales  above  the  point  which  the  export  manager  con- 
siders an  average  salesman  should  secure  his  salary  will 
be  raised  accordingly,  but  if  he  fails  to  reach  this  mark  it 
will  be  necessary  for  him  to  look  for  a  job  somewhere  else. 
What  methods  should  the  Volk  Paint  Company  adopt 
for  the  stimulation  of  its  sales  force  in  the  Latin  Ameri- 
can field? 


Problem  108 
VoLK  F*AiNT  Company — Control  of  Salesmen 

One  of  the  difficulties  the  Volk  Paint  Company  expe- 
rienced in  its  initial  attempts  in  sending  salesmen  into 
the  South  American  market  was  the  loss  of  control  of 
these  representatives  by  the  home  office.  In  the  domestic 
territories  the  salesman's  itinerary  is  planned  minutely 
in  advance.  The  sales  manager  knows  exactly  which 
town  each  man  is  working  and  where  he  can  be  reached. 
Every  morning  the  home  office  receives  a  report  of  the 
salesman's  activities  of  the  preceding  day  and  knows  with 
what  success  he  is  meeting.  Any  change  in  itinerary  can 
be  reported  to  the  home  office  quickly  by  telephone  or  tele- 
graph, if  necessary,  and  important  price  changes  or  spe- 
cial instructions  can  be  transmitted  in  the  same  manner 
to  the  salesman. 

In  South  America  this  close  contact  cannot  be  main- 
tained, although  the  salesman  may  make  weekly  reports 
or  the  firm  may  send  weekly  letters  of  instruction.  From 
Cuba  and  Mexico  mail  may  be  received  in  five  days'  time, 
but  from  other  parts  of  Latin  America  mail  requires 
from  two  weeks  to  a  month  to  reach  the  company's  home 
office  in  the  States.  Continual  ca])ling  is  expensive  and 
frequently  impractical,  for  the  salesman  is  in  direct  cable 
contact  with  the  United  States  only  at  ports.  In  many 
inland  towns  there  are  no  adequate  telegraph  or  cable 
facilities,    Messages  are  apt  to  become  garbled  in  trans- 


EXPORT  SALES  FORCE  423 

mission  over  poor  lines  through  several  stations.  Only 
when  sending  instructions  on  price  changes  or  other  im- 
portant communications  does  the  company  consider  the 
use  of  the  cable  to  be  warranted. 

Although    the    itinerary    of   its    foreign    salesmen    is 
planned  long  in  advance,  so  that  the  Volk  Paint  Com- 
pany knows  at  least  the  towns  of  importance  which  its 
salesmen  will  work,  the  itinerary  cannot  be  followed  as 
closely  as  in  the  domestic  market.    Not  infrequently  the 
salesman  is  delayed  a  day  or  two  in  making  port  because 
of  the  length  of  his  voyage,  the  number  of  stops  that  are 
made  en  route,  and  an  occasional  storm.     After  he  gets 
started  in  his  territory  he  may  find  that  it  is  necessary 
to  take  a  few  days  longer  than  he  expected  to  cover  the 
dealers   efficiently.     Transportation   is   uncertain.     Re- 
cently the  company  received  no  word  for  over  a  month 
from  its   salesman   operating   in   Colombia   and  Vene- 
zuela.    Cables  were  apparently  ignored.     The  company 
could  find  no  trace  of  him  and  it  had  just  about  decided 
to  send  another  man  to  cover   this  territory  Avhen  it 
learned  that  in  going  from  Barranquilla  to  Medelhn  and 
Bogarta  the  salesman  had  been  stranded  for  twelve  days 
on  a  steamer  in  the  Magdalena  River.     His  telegraphic 
messages  had  failed  to  come  through  and  all  his  letters 
had  been  held  up  until  the  next  boat.     Under  ordinary 
conditions  it  might  be  possible  to  send  all  correspond- 
ence to  the  town  in  which  the  salesman  expects  to  be 
on  a  specified  date  with  the  idea  that  it  will  be  forwarded 
if  he  has  left ;  but  in  the  newly  developed  regions,  away 
from  the  coast,  mails  are  uncertain,  losses  frequently  oc- 
cur, and  this  method  has  been  found  to  be  unsatisfactorJ^ 
_  How  should  the  Volk  Paint  Company  control  the  activi- 
ties of  its  salesmen  in  Latin  America  ? 

(a)  The  Volk  Paint  Company  has  never  required 
formal  reports  from  its  export  salesmen,  Imt  has  simply 
asked  them  to  write  letters  giving  information  as  to 
busmess  conditions,  detailing  their  experiences  and 
including  a  simple  expense  report.  AVould  it  be  desirable 
to  require  daily  or  weekly  reports!    If  so,  what  iuforma- 


42i    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

tion  should  be  included?     Should  special  forms  be  pro- 
vided? 

(b)  What  policy  should  the  company  adopt  concerning 
expense  accounts?  Its  domestic  salesmen  are  strictly 
limited  as  to  the  character  and  amount  of  items  to  be 
included  in  expense  accounts.  This  general  policy  of 
strict  limitation  has  not  been  applied  to  the  export  sales 
force,  and  the  company  has  encountered  occasional  in- 
stances of  padding  of  expense  accounts,  instances  in 
which  such  an  item  as  entertainment  contained  a  great 
deal  devoted  to  the  personal  entertainment  of  the  sales- 
men but  little  of  the  type  considered  legitimate  in  busi- 
ness-getting in  certain  countries.  Should  a  formal  ex- 
pense report  be  drawn  up  in  which  the  allowable  items 
were  detailed?     How  are  expenses  to  be  checked  up? 

(c)  The  Volk  Paint  Company,  in  common  with  many 
other  companies,  has  prepared  and  published  a  sales 
manual  for  the  use  of  its  domestic  salesmen.  The  table 
of  contents  contains  the  following: 

Part  I 

Salesmen's  code;  the  house  and  its  history;  the 
organization  of  the  company;  the  product;  sales; 
equipment;  standard  sales  presentation;  points 
of  contact  with  prospective  customers ;  answering 
objections  to  sales  arguments;  handling  adver- 
tising inquiries ;  organizing  the  territory. 

Part  II 

Terms  of  sale;  discounts;  quotations;  orders  and 
shipments ;  instructions  as  to  credits ;  allowances ; 
daily  reports;  agency  contracts;  expenses. 

It  has  been  found  that  such  a  manual  is  valuable  in 
training  domestic  salesmen,  in  giving  them  a  reference 
work,  for  refreshing  their  memories  while  in  the  field, 
for  making  unnecessary  correspondence  asking  for  infor- 
mation, and  for  removing  many  of  the  causes  for  friction 
and  dispute  between  sales  force  and  management.  Is  a 
sales  manual  desirable  for  tlie  export  sales  force?  If 
so,  what  points  should  it  cover! 


CHAPTER  IX 


FOREIGN  BRANCHES 

A  STUDY  of  some  of  America's  most  successful 
concerns  in  the  export  tield  gives  ample  proof 
that  distribution  through  branches  may  under 
proper  conditions  be  a  most  brilliantly  successful  method. 
Such  concerns  as  the  National  Cash  Register  Company, 
the  U.  S.  Steel  Corporation,  the  Singer  Sewing  Machine 
Company,  the  Allied  Machinery  Company  of  America, 
and  numerous  others  have  for  many  years  maintained 
branches  in  various  parts  of  the  world  which  are  re- 
garded as  the  most  important  elements  in  their  foreign 
trade  organization  and  in  selling  in  foreign  markets. 
Yet  even  these  powerful  corporations  have  established 
branches  not  in  all  cities,  but  only  at  strategic  points. 
No  concern  finds  it  advisable  to  establish  branches  indis- 
criminately. 

Unfortunately,  the  failures  of  many  concerns  to  ex- 
port goods  successfully  through  branch  organizations 
are  not  matters  of  record  and  the  peculiar  dangers  of 
the  method  are  likely  to  be  underestimated  because  we 
hear  of  the  successes  and  not  of  the  failures.  Branch 
distribution  offers  of  course  the  most  intensive  means 
of  developing  a  foreign  market.  It  is  also  the  method 
which  requires  the  largest  outlay  both  for  initial  estab- 
lishment and  for  maintenance  from  year  to  j^ear.  On 
that  account  a  self-supporting  market  worked  by  a 
branch  must  yield  much  larger  volume  than  a  market 
which  is  self-supporting  but  worked  through  agents  or 
by  salesmen.  American  concerns,  which  have  established 
branches  in  foreign  countries,  have  differed  in  their  poli- 
cies as  to  allotment  of  functions  to  foreign  branch  estab- 
lishments.   Such  concerns  as  the  International  Harvester 

485 


426    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Company,  the  Eastman  Kodak  Company,  and  others  have 
found  it  wise  to  establish  branch  manufacturing  estab- 
lishments, as  well  as  more  numerous  selling  branches. 
There  are  a  number  of  factors  which  may  make  it  espe- 
cially advisable  for  certain  firms  to  establish  branch  fac- 
tories, among  which  may  be  mentioned  particularly 
tariffs,  trade-mark  and  patent  laws,  and  cost  of  produc- 
tion. The  most  common  form  of  branch  is  a  selling  estab- 
lishment in  which  the  American  exporter  carries  on  what 
amounts  to  a  wholesale  business  in  his  product  or  line  of 
products.  These  branches  sell  to  dealers  of  various  classes 
and  sometimes  to  large  consumers.  The  questions  of  pol- 
icy which  arise  with  respect  to  the  management  of  such 
branches  are  much  the  same  as  those  in  the  domestic 
market.  Branches  which  are  so  operated  as  to  give 
impression  that  they  are  competing  actively  with  dealers 
may  narrow  the  market  for  the  manufacturer's  goods 
rather  than  widen  it.  In  other  words,  the  branch  which 
sells  to  retailers,  and  attempts  at  the  same  time  to  sell 
to  wholesalers  who  expect  to  sell  to  the  same  retailers, 
may  so  antagonize  wholesalers  that  the  product  will  not 
be  handled  and  that  ultimately  many  dealers  who  are 
not  reached  by  the  branch  will  not  handle  the  goods. 

A  third  form  of  branch  is  that  which  sells  at  retail  to 
consumers.  Just  as  comparatively  few  manufacturers  in 
the  domestic  market  attempt  to  market  their  goods 
through  their  own  stores  to  consumers,  so  there  are  com- 
paratively few  in  the  foreign  markets  who  establish  their 
own  retail  stores.  Certain  shoe  concerns  have  estab- 
lished stores  successfully,,  but  manufacturers'  retail 
stores  furnish  many  pitfalls.  Losses  have  been  frequent 
in  both  domestic  and  foreign  markets,  and  in  the  latter 
the  danger  is  of  course  greater. 

In  the  organization  and  operation  of  branches,  much 
depends  upon  the  philosophy  of  management  which  pre- 
vails in  the  enterprise  as  a  whole.  If  strict  and  detailed 
control  is  insisted  upon  in  all  departments  of  the  con- 
cern and  responsibility  is  shifted  from  level  to  level 
through  the  chief  executives,  then  the  organization  and 


FOREIGN    BRANCHES  427 

operation  of  the  branch  will  differ  in  essential  details 
from  the  organization  of  a  branch  which  is  regarded 
as  a  semi-independent  selling  company. 

The  following  outline  mentions  a  number  of  problems 
connected  with  the  organization  and  operation  of  foreign 
branches : 

A.  Location  and  Establishment  of  Branches. 

Under  what  conditions  shall  branch  factories  be  established  ? 
What  considerations  should  determine  location? 

When  should  wholesale  branches  be  established?  How 
should  location  be  determined? 

Should  the  manufacturer,  who  operates  retail  stores  in  the 
United  States,  attempt  to  operate  retail  stores  in  foreign 
cities  ? 

B.  Organization  of  Foreign  Branches. 

What  should  be  the  relation  of  the  foreign  branch  to  the 
home  office? 

Should  the  branch  be  a  practically  independent  institution 
or  should  it  be  subject  to  close  and  detailed  supervision? 

Should  branches  carry  stock? 

Should  branches  pass  upon  credits? 

What  should  be  the  authority  of  the  branch  with  respect 
to  advertising? 

Under  what  conditions  should  branches  be  incorporated? 

C.  Selection  and  Training  of  Branch  Managers. 

What  are  the  sources  of  branch  managers? 

Should  branch  managers  be  selected  from  the  company's 
export  sales  force  or  from  the  home  office  or  plant? 

Should  natives  or  Americans  be  used  as  branch  managers? 

How  should  branch  managers  be  trained? 

Should  the  branch  managership  be  regarded  as  a  step  in 
the  promotion  of  export  salesmen? 


428    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

D.  Supervision  and  Control  of  Branches. 
How  should  branches  be  supervised? 
What  records  should  branches  keep? 
What  reports  should  branches  make  to  the  home  office? 

Problem  109 

Marshall  Ink  Company — Retaining  or  Abandoning 
Foreign  Branches 

The  Marshall  Ink  Company  is  having  difficulty  in 
maintaining  its  volume  of  foreign  sales  on  a  profitable 
basis.  For  several  years  it  has  maintained  branches  and 
warehouses  at  Copenhagen,  London,  Lyons,  Buenos 
Aires,  Mexico  City  and  Hong  Kong.  These  branches 
were  established  when  the  product  was  being  introduced 
in  order  to  enable  the  company  to  furnish  quick  service 
to  its  customers.  It  also  was  an  aid  to  salesmen  in  sell- 
ing goods  if  they  could  say  "Not  only  have  we  a  large 
factory  in  America  which  produces  the  best  ink  that  can 
be  made  anywhere,  but,  in  addition,  we  maintain  a  ware- 
house here  in  your  own  country  in  order  to  serve  your 
needs  promptly."  Now,  however,  sales  are  falling  off 
and  retailers  are  using  the  branches  to  carry  stock,  call- 
ing on  them  only  for  small  orders  to  fill  a  week's  supply. 
These  small  shipments  require  so  much  attention  and 
additional  work  that  the  company  is  not  making  a  reason- 
able profit  on  the  amount  of  foreign  business  that  it  is 
still  carrying  on. 

One  of  the  salesmen  has  suggested  that  since  the 
branch  houses  are  being  abused  and  are  expensive  to 
maintain,  they  should  be  withdrawn.  He  says  that  it  has 
been  his  experience  that  when  a  customer  realizes  that  a 
traveling  salesman  will  make  but  one  visit  in  six  months 
or  a  year  he  buys  large  amounts  in  anticipation  of  his 

*Foreigii  branelicB  are  treated  by  Tlough,  Practical  Exporting,  pages 
309-310;  Dudeney,  The  Exporter's  Handbook  and  Glossary,  Chap.  XII; 
and  Wolfe,  Theory  and  Practice  of  International  Commerce,  Chap.  XVIII. 


FOREIGN    BRANCHES  429 

requirements  for  the  entire  period.  Once  he  has  a  large 
order  on  his  shelves  in  which  his  money  is  tied  up,  it  is 
to  his  interests  to  push  the  sale  of  the  product  and  he 
acts  accordingly.  By  abolishing  the  branches  and  ship- 
ping direct  from  the  factory,  the  company  would  be  able 
to  economize  substantially,  since  it  would  not  have  the 
expense  of  a. branch  manager,  w^arehouse  man,  and  book- 
keeper, nor  would  it  have  to  make  any  payments  for  local 
taxes  on  a  branch  organization,  nor  for  rent,  heat,  and 
light. 

When  told  that  the  withdrawing  of  the  Marshall  Ink 
Company's  branches  from  these  countries  would  make  it 
unprofitable  for  the  small  dealer  to  carry  the  company's 
products,  since  his  order  would  be  too  small  to  export 
profitably,  the  salesman  said  that  the  company  must  build 
Tap  a  clientele  among  foreign  wholesalers  to  handle  the 
business  of  the  small  dealers.  He  suggested  that  when- 
ever a  salesman  visited  a  large  city  he  should  spend  two 
or  three  weeks  calling  upon  the  small  retailers  and  se- 
curing their  orders,  which  he  would  turn  over  to  the 
wholesaler.  The  wholesaler  would  then  order  the  total 
amount  of  these  orders  direct  from  the  company  and  in 
addition,  should  order  an  additional  amount  sufficient  to 
take  care  of  his  requirements  during  the  next  six  months. 

Should  the  Marshall  Ink  Company  adopt  the  recom- 
mendations of  its  salesman? 


Problem  110 

Waldron  Piano  Company — Establishment  of  Branch 
Factories  and  Assembling  Plants 

(a)  From  the  time  that  square  pianos  were  first  in 
vogue  until  the  present  date  the  Waldron  Piano  Company 
has  occupied  a  strong  position  in  the  domestic  market. 
Having  established  a  reputation  for  producing  a  musical 
instrument  of  the  first  quality,  whether  grand  or  upright, 
the  company  has  increased  the  demand  for  its  product  by 


430    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

manufacturing  a  player  attachment,  thus  making  it  pos- 
sible for  even  the  untrained  musician  to  use  the  Waldron 
piano.  In  the  foreign  field  the  company  is  operating 
branches  in  London,  Paris,  Madrid,  and  Melbourne,  Ade- 
laide, Brisbane  and  Sydney;  special  agents  carry  Wald- 
ron pianos  in  all  the  South  American  countries. 

Within  the  past  few  years  the  sales  volume  has  in- 
creased to  such  an  extent  that  the  company's  American 
factory  has  outgrown  its  present  fapilities  and  must  be 
enlarged  or  a  second  factory  secured.  Because  of  the 
wide  sale  of  Waldron  pianos  abroad,  the  establishment 
of  a  Waldron  factory  in  England  is  now  being  urged. 
Although  the  sales  in  Great  Britain  alone  scarcely  war- 
rant such  a  step,  were  a  factory  once  established  there 
the  exports  to  Spain,  Australia,  New  Zealand,  India,  and 
even  to  Brazil  and  Argentina  might  be  handled  from  Lon- 
don to  better  advantage  than  from  New  York.  By  serv- 
ing these  markets  the  volume  of  sales  would  be  ample 
to  warrant  the  establishment  of  an  English  plant.  A 
number  of  advantages  would  accrue  from  such  a  step.  In 
the  first  place  the  British  colonies  allow  English  goods  to 
enter  free,  or  at  least  with  a  comparatively  low  duty. 
The  saving  thus  realized  would  be  substantial,  since  the 
duty  on  pianos  imported  into  British  colonies  from  oWu^r 
countries  is  sometimes  as  high  as  35%.  Since  there  is 
a  natural  feeling  among  English  people  in  the  colonies  to 
give  preference  to  British  goods,  it  is  frequently  easier 
to  sell  pianos  made  in  England  than  those  manufactured 
in  some  other  country. 

From  London  to  Rio  de  Janeiro  and  Buenos  Aires 
steamship  service  is  more  rapid  and  freight  rates  are 
lower  than  from  Now  York.  The  balance  of  trade  be- 
tween England  and  Argentina  is  favorable  toward  ex- 
ports from  Great  Britain  and  many  South  American? 
favor  trading  with  European  countries  rather  than  with 
the  United  States  because  of  their  closer  associations 
The  exchange  rates  enable  British  manufacturers  to 
quote  better  prices  in  the  foreign  field  than  American 
exporters,  and  inasmuch  as  labor  plays  a  large  part  in 


FOREIGN    BRANCHES  431 

the  production  of  pianos,  the  lower  wage  scale  and  pro- 
duction costs  in  England  are  also  favorable. 

Even  if  a  factory  were  established  in  England  the 
northern  and  western  coasts  of  South  America  would 
continue  to  be  handled  from  New  York  City,  because  of 
shorter  transportation  routes  and  closer  proximity  to 
the  United  States.  As  a  result  the  exporting  of  Waldron 
pianos -to  Latin  America  would  be  divided  between  the 
English  and  American  factories  instead  of  being  handled 
under  one  head.  Because  of  high  freight  rates,  Canadian 
business  would  also  be  handled  from  the  New  York  office. 
By  establishing  a  factory  in  England,  therefore,  the  com- 
pany would  lose  some  of  the  efficiency  resulting  from 
centralized  control  of  the  purchasing,  planning,  operat- 
ing, and  selling  functions. 

Would  it  be  advisable  for  the  Waldron  Piano  Company 
to  open  an  English  factory? 

(b)  The  Waldron  Piano  Company  is  faced  with  the 
question  of  whether  or  not  it  should  establish  a  plant  in 
Australia  for  the  assembling  of  its  pianos.  For  a  long- 
time the  company  has  felt  the  burden  of  heavy  freight 
charges,  which  because  of  the  long  voyage  have  been  suf- 
ficient to  wipe  out  all  but  a  nominal  profit  on  its  Aus- 
tralian business  in  spite  of  the  fact  that  the  company 
has  substantial  sales  in  that  territory.  The  people  are 
progressive,  many  have  made  small  fortunes  in  mining, 
manufacturing,  and  stock  raising,  and  even  those  w^ho 
have  not  been  so  fortunate  financially  are  frequently 
ready  to  spend  what  money  they  have  for  good  furniture, 
pianos,  and  house  furnishings.  At  the  present  time  the 
Waldron  Company  operates  branches  in  Melbourne,  Ade- 
laide, Brisbane,  and  Sydney,  and  its  sales  are  increasing 
more  rapidly  here  than  in  any  other  foreign  field. 

If  an  assembling  plant  were  established,  the  company 
would  be  able  to  secure  much  lower  freight  rates,  since 
piano  parts  not  only  take  up  less  room  than  a  completed 
piano  but  also  can  be  shipped  under  a  lower  rate  classifi- 
cation. Likemse,  there  would  be  a  saving  in  duty  inas- 
much as  the  Australian  custom  law  allows  piano  parts  to 


432    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

enter  the  country  at  a  lower  rate  than  finished  instru- 
ments. An  assembling  plant  for  pianos  would  require 
neither  complicated  machinery  nor  a  large  amount  of 
equipment.  The  costs  of  delivering  a  finished  piano  to 
the  company's  branch  salesrooms  in  Australia  would  be 
materially  lessened  by  the  establishment  of  this  plant. 

Although  high-grade  furniture  makers  would  be  able 
to  do  most  of  the  work,  there  would  be  some  danger  of  th<? 
assembling  being  done  in  a  more  slip-shod  manner  than 
if  the  w^ork  w^ere  handled  in  the  home  factory  under  the 
direct  supervision  of  the  company's  trained  staff.  If 
one  or  two  pianos  were  sold,  which  later  showed  faulty 
construction  or  developed  an  inferior  quality  of  tone,  the 
reputation  of  the  Waldron  Company  in  Australia  would 
be  seriously  impaired.  By  separating  the  different  proc- 
esses of  manufacturing  from  that  of  assembling  the 
company  would  lessen  its  control  over  the  quality  of  the 
finished  product.  Much  of  the  Waldron  Company's  suc- 
cess is  due  to  the  pride  and  loyalty  of  its  American  or- 
ganization which  has  been  built  up  over  a  period  of  many 
years,  and  it  might  be  difficult  to  inculcate  this  same  de- 
gree of  pride  and  care  in  the  newly  organized  crew  of 
workmen  of  the  Australian  plant. 

Would  it  be  advisable  for  the  Waldron  Piano  Company 
to  establish  an  assemljling  plant  in  Australia? 

(c)  For  several  years  prior  to  1914  the  Waldron  Piano 
Company  operated  a  branch  in  Berlin,  but  since  the  war 
it  has  not  attempted  to  reopen  this  branch  because  of  the 
depreciation  of  the  German  mark  and  the  difficulty  of 
competing  with  pianos  of  German  manufacturers.  The 
question  of  German  competition  is  becoming  more  and 
more  serious  even  in  South  America  and  other  parts  of 
the  foreign  field.  Although  some  German  manufacturers 
are  still  carrying  on  an  export  business,  others  iire  practi- 
cally bankrupt  and  are  able  to  obtain  credit  only  with 
difficulty.  The  AValdi'on  C(mipany  is  not  l)lin(l  to  the  fact 
that  a  possible  way  of  meeting  German  competition  is  to 
buy  and  operate  one  of  these  plants,  and  accordingly  it 
has  secured  an  option  to  purchase  the  Steuben  Piano 
Factory  of  Berlin. 


FOREIGN    BRANCHES  433 

The  Steuben  Piano  Factory  is  admirably  equipped  to 
manufacture  high-class  instruments;  it  is  located  on  a 
railroad  spur  on  the  outskirts  of  Berlin,  skilled  workmen 
are  readily  available,  the  plant  appears'  to  be  desirable 
in  every  way  and  it  can  be  secured  at  a  reasonble  figure 
within  the  reach  of  the  Waldron  Company.  By  taking 
advantage  of  the  depreciation  of  German  currency  and 
the  resulting  comparatively  low  prices  of  raw  material 
and  labor,  the  Waldron  Company  should  be  able  to  pro- 
duce a  high-grade  piano  at  low  cost  with  which  to  re-enter 
the  German  market  where  heretofore  it  has  always  fomid 
a  good  demand  for  its  instruments.  In  competing  for 
trade  in  South  America,  the  Waldron  Company  would 
then  be  on  an  equal  footing  with  native  German  manu- 
facturers and  would  be  able  to  quote  the  same  prices  and 
terms. 

The  company  recognizes  that  this  comparative  ad- 
vantage over  German  manufacturers  may  be  rather  short- 
lived, but  it  hopes  that  if  it  purchases  this  plant  it  will  be 
able  to  build  up  a  sufficient  volume  of  sales  to  warrant  a 
continuation  of  its  German  factory  even  when  the  pres- 
ent costs  of  manufacturing  are  more  nearly  comparable 
to  those  in  the  United  States.  By  purchasing  the  Steu- 
ben works  and  putting  its  capital  in  a  German  enterprise 
the  company  will  be  furnishing  employment  to  German 
workmen,  helping  German  steamship  companies  to  se- 
cure additional  freight,  and  indirectly  aiding  other  Ger- 
man manufacturers  by  lending  its  good-will  and  reputa- 
tion to  increasing  the  prestige  of  articles  of  German  man- 
ufacture. It  is  questionable,  therefore,  if  this  policy 
would  be  wise  in  view  of  the  past  competition  the  Ameri- 
can factory  has  experienced  from  German  houses. 

A  further  difficult  question  which  arises  is,  ''If  the 
Waldron  Company  purchases  the  Steuben  factory,  should 
it  use  this  plant  to  manufacture  Waldron  pianos  or  should 
it  continue  the  manufacture  of  Steuben  pianos?"  By 
manufacturing  Waldron  pianos  in  Germany  to  sell  at  re- 
duced prices  the  company  might  injure  its  reputation  and 
prestige.    Steuben  pianos  have  been  manufactured  for  a 


434    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

number  of  years  and  have  a  well-established  reputation 
for  quality  throughout  Germany  and  Australia.  In  nor- 
mal times  before  the  war,  this  instrument  sold  from  $100 
to  $200  less  than  the  Waldron.  By  continuing  to  manu- 
facture Steuben  pianos  the  Waldron  Company  would  be 
capitalizing  the  good-will  already  built  up  for  these 
instruments  and  would  have  a  cheaper  piano  with  which 
to  meet  German  price  competition  without  at  the  same 
time  injuring  its  reputation  by  lowering  the  price  of  the 
Waldron  product.  This  policy,  however,  would  not  assist 
the  AValdron  Company  in  meeting  German  competition 
with  its  own  product,  but  instead  would  saddle  the  com- 
jjany  with  the  burden  of  marketing  two  pianos  instead 
of  one. 

Should  the  AValdron  Piano  Company  purchase  the 
Steuben  Piano  Factory  in  Berlin!  If  so,  should  it  con- 
tinue to  manufacture  Steuben  pianos  in  Germany  or 
should  it  utilize  the  new  plant  for  the  manufacture  of  its 
o^vn  instruments? 


Problem  111 

The  Safe-Edge  Razor  Company — Incorporation  of  Branches* 

(a)  The  Safe-Edge  Razor  Company  has  been  selling 
its  product  in  foreign  fields  mainly  through  its  o"\vn  sales- 
force.  The  razor  which  this  firm  manufactures  is  fitted 
with  a  special  honing  and  sharpening  device  which  has 
proved  a  particularly  strong  selling  point  in  foreign  coun- 
tries where  the  people  trained  in  habits  of  thrift  dislike  to 
discard  a  blade  which  has  been  used  but  a  few  times.  The 
Safe-Edge   Company  has   salesmen    operating  in   every 

*Tho  Bureau  of  Foreign  and  Domestic  C^miinerce  of  the  Department 
of  Commerce  has  recently  established  a  Commercial  Laws  Division,  the 
purpose  of  which  is  to  collect  and  disseminate  information  upon  foreign 
law  yiid  foreign  legal  procedure  of  interest  to  citizens  of  the  United 
States  engaged  in  export  and  import  trade.  While  the  bulk  of  informa- 
tion is  carried  in  the  files  of  the  Department  at  Washington,  the  Com- 
mercial Laws  Division  publishes  articles  and  riioMograjilis  from  time  to  time 
particularly  in  Commerce  Reports. 


FOREIGN    BRANCHES  435 

country  in  Europe  except  Germany  and  Russia ;  in  Latin 
America  it  is  covering  Cuba,  Mexico,  Brazil,  Argentina, 
and  Cliile;  it  also  has  exclusive  agents  in  China,  India, 
and  Australia.  It  is  the  policy  of  the  firm  to  establish 
branch  offices  and  warehouses  in  countries  as  soon  as  the 
sales  volume  is  large  enough  to  make  such  a  branch  self- 
supporting.  At  present  branches  have  been  established 
in  London,  Paris,  Milan,  Copenhagen,  Mexico  City,  Rio  de 
Janeiro,  Valparaiso,  and  Buenos  Aires.  In  Spain  the 
sales  volume  of  the  company  has  increased  to  approxi- 
mately $140,000  a  year ;  and  according  to  the  company 's 
policy  a  branch  in  Madrid  is  warranted,  but  because  of 
Spanish  tax  legislation  directed  against  branch  organi- 
zations this  step  has  not  yet  been  taken. 

In  sending  salesmen  into  Spanish  territory  without  a 
branch  organization,  the  company  is  subject  to  commer- 
cial travelers'  foes  and  various  other  minor  charges;  but 
by  organizing  a  branch  in  Madrid,  the  company  would  lay 
itself  open  to  a  tax  of  15%  of  10%  of  the  total  profits  of 
the  American  company.  This  tax  would  be  more  than 
enough  to  wipe  out  the  entire  profits  of  the  Spanish 
branch.  To  overcome  this  difficulty  the  officials  of  the 
Safe-Edge  Company  are  considering  the  incorporation  of 
the  Madrid  branch  as  a  separate  Spanish  company  or  its 
estabhshment  as  a  branch  of  the  incorporated  Safe-Edge 
Company  of  London. 

By  complying  with  the  provisions  of  the  English  laws 
regarding  ownership  of  stock  and  other  rather  compli- 
cated regulations,  the  Safe-Edge  Razor  Company  in  Lon- 
don has  established  itself  as  a  distinctly  EngHsh  en- 
terprise, legally  independent  of  the  Safe-Edge  Razor 
Company  of  America.  Therefore,  if  a  Spanish  branch 
were  estabhshed  by  the  English  Company,  the  tax  levied 
by  the  Spanish  Government  would  be  only  15%  of  10%)  of 
the  total  profits  of  the  English  and  Spanish  houses  com- 
bined. The  English  Safe-Edge  Company  has  never  made 
large  profits  for  the  firm  and  the  taxation  burden  would 
therefore  be  comparatively  light.  Since  the  head  of  the 
London  company  is  an  Englishman  who  is  concentrating 
his  efforts  on  the  development  of  English  sales,  he  is  more 


436    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

or  less  unfamiliar  with  the  conditions  which  must  be 
faced  in  Spain.  Furthermore,  to  establish  the  Spanish 
branch  as  a  branch  of  the  separate  London  company 
might  result  in  a  serious  complication  in  the  sales  policy 
of  the  Safe-Edge  Company  of  America.  This  firm  has 
always  found  it  advisable  to  keep  in  direct  touch  with 
its  foreign  branches  rather  than  deal  through  one  branch 
in  order  to  reach  another. 

The  other  proposal  is  to  organize  an  independent  Span- 
ish sales  company  under  the  name  of  the  Safe-Edge  Com- 
pany of  Madrid.  This  company  would  be  incorporated 
for  50,000  pesos  and  the  procedure  would  be  as  follows : 

A  reliable  and  trustworthy  Spanish  attorney  would  be 
employed,  who  would  secure  the  necessary  legal  docu- 
ments for  incorporation,  and  arrange  for  the  feeing  or 
''tipping"  of  the  proper  Spanish  officials  in  order  to 
avoid  obstacles  that  might  be  placed  in  the  way  of  in- 
corporation. A,  B,  and  C,  native  Spanish  clerks  to  be 
employed  in  the  offices  and  warehouse  of  the  Safe-Edge 
Company  of  Madrid,  would  be  given  100  pesos  each  with 
which  to  purchase  one  share  each  of  the  stock  of  the  new 
company.  Ramon  Sompano  and  Jose  Esteves,  two  Span- 
ish salesmen  employed  by  the  Safe-Edge  Razor  Com- 
pany, would  also  be  given  100  pesos  with  which  to  buy 
one  share  of  stock  apiece.  The  attorney's  assistant  would 
receive  a  share  in  the  same  manner,  the  remaining  shares 
of  stock  being  held  by  the  attorney  himself. 

A  meeting  would  be  called  of  the  stockholders,  at  which 
the  attorney,  his  assistant,  Ramon  Sompano,  Jose  Es- 
teves, and  one  of  the  Spanish  clerks  would  be  elected  as 
directors.  These  directors  would  hold  a  meeting  and 
elect  Jose  Esteves  as  president,  the  assistant  attorney  as 
vice-president,  and  the  attorney  as  secretary  and  treas- 
urer. The  president  and  vice-president  would  then  re- 
sign and  the  members  of  the  export  department  of  the 
Safe-Edge  Company  of  America  would  be  elected  to  fill 
the  vacancies.  The  stock  held  by  the  Spanish  stockhold- 
ers would  then  be  turned  over  to  tlie  company  in  return 
for  a  fee  paid  for  their  services.     The  attorney  would 


FOREIGN    BRANCHES  437 

then  resign  as  secretary  and  treasurer  and  his  place 
would  be  filled  by  the  export  manager.  The  stock  would 
also  change  hands  at  the  same  time,  thus  leading  the 
Spanish  corporation  in  control  of  the  American  company. 

As  a  slight  modification  of  the  latter  plan  it  has  been 
suggested  that  the  English  Safe-Edge  Company  should 
handle  all  matters  incident  to  the  incorporation  of  the 
Spanish  company ;  then  if  the  Spanish  courts  should  de- 
cide that  the  incorporation  of  the  Safe-Edge  Company  of 
Madrid  was  not  handled  in  such  a  way  as  to  make  it  dis- 
tinct from  the  American  Company,  at  least  it  would  be 
impossible  for  the  Spanish  Government  to  collect  more 
than  15%  of  10%  of  the  combined  profits  of  the  London 
and  Madrid  organizations. 

Because  of  the  complexity  of  the  regulations  to  be  com- 
plied with  in  such  an  undertaking  and  the  uncertainty  as 
to  the  decision  that  might  be  rendered  by  the  Spanish 
courts  in  any  such  case,  the  suggestion  also  has  been 
made  that  the  Safe-Edge  Company  of  America  should 
continue  to  sell  its  product  in  Spain  Avithout  any  branch 
organization  in  that  country. 

What  action  should  the  Safe-Edge  Razor  Company 
take  in  regard  to  the  establishment  of  a  branch  in  Ma- 
drid? 

(b)  The  Safe-Edge  Razor  Company  is  contemplating 
the  separate  organization  of  the  sales  branches  which  it 
already  has  established  in  Argentina,  Brazil,  and  Chile. 
The  following  reasons  are  given  for  the  incorporation 
of  a  branch  in  each  of  these  countries :  It  would  enable 
the  company  to  obtain  the  good-will  which  emanates  from 
the  preference  of  the  inhabitants  of  each  of  these  coun- 
tries to  patronize  domestic  industries  and  firms ;  it  would 
enable  the  salesmen  to  state  that  they  are  representing 
the  Safe-Edge  Razor  Company  of  Rio  de  Janeiro  or  of 
Buenos  Aires;  it  would  stimulate  confidence  among  cus- 
tomers that  the  company  is  not  merely  taking  away  busi- 
ness from  native  houses  in  times  of  prosperity  only  to 
abandon  the  field  in  times  of  depression  and  heavy  losses ; 
it  would  foster  an  esprit  de  corps  within  the  organiza- 


438    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

tion;  it  would  make  it  possible  for  the  American 
Company  to  sell  its  product  to  each  foreign  branch  as 
if  it  were  an  independent  wholesaler,  thereby  throwing 
on  the  branch  organization  the  responsibility  for  losses 
and  profits  in  each  territory;  by  incorporating  its 
branches  in  each  of  these  countries  now  while  the  local 
taxations  on  such  corporations  are  light,  the  Safe-Edge 
Company  of  America  might  be  safeguarded  against 
heavy  increases  in  taxation  on  foreign  corporations  in 
the  future,  when  the  present  means  of  securing  revenue 
primarily  from  import  duties  no  longer  suffices.  On  the 
other  hand,  it  is  not  necessary  at  the  present  time  to 
take  such  a  step  in  order  to  avoid  the  immediate  risk  of 
such  excessive  taxation  as  exists  in  the  case  of  Spanish 
business;  furthermore,  the  incorporation  of  each  sep- 
arate branch  would  involve  additional  expense. 

If  the  policy  is  adopted,  it  is  planned  to  make  the  local 
manager,  who  is  now  in  charge  of  the  branch,  president 
of  the  corporation  in  each  case  where  he  is  capable  of 
assuming  such  responsibility.  Otherwise  the  export  man- 
ager of  the  American  Company  will  fill  this  position  and 
the  local  branch  manager  will  be  given  the  title  of  gen- 
eral manager  of  the  new  company.  The  president  or 
general  manager  of  such  an  incorporated  branch  will  be 
expected  to  assist  the  salesforce  in  closing  difficult  sales 
transactions  with  customers,  many  of  whom  are  im- 
pressed by  the  dignity  of  a  title. 

Should  the  Safe-Edge  Razor  Company  adopt  the  policy 
of  incorporating  its  foreign  branches  in  Argentina,  Bra- 
zil, and  Chile? 


FOREIGN    BRANCHES  439 

Problem  112 
The  Sawyer  Company — Establishing  a  Foreign  Warehouse 

The  Sawyer  Company  is  having-  difficulty  in  introduc- 
ing its  Hue  of  crepe  paper  in  the  Scandinavian  countries. 
Most  shops  which  carry  this  line  of  merchandise  arc 
small  and  have  but  little  capital.  They  are  accustomed 
to  buying  in  small  lots  and  securing  quick  service  from 
native  wholesalers.  Even  the  shops  which  are  large 
enough  to  carry  a  full  line  hesitate  to  do  so  in  the  case 
of  a  new  article  recently  introduced  in  which  they  have 
not  yet  complete  confidence.  Because  of  their  distance 
from  the  factory  in  the  United  States,  service  has  been 
slow  and  the  foreign  salesmen  of  the  Sawyer  Company 
are  advocating  the  establishment  of  a  warehouse  in 
Copenhagen. 

Letters  from  the  company's  representatives  traveling 
in  the  Scandinavian  countries  point  out  that  the  German 
competitors  are  able  to  supply  crepe  paper  upon  short 
notice  direct  from  their  factories,  a  comparatively  short 
distance  away  from  the  Scandinavian  market.  This  field 
is,  therefore,  highly  competitive.  Although  the  price 
quotations  are  satisfactory,  to  make  its  efforts  felt  the 
company  should  improve  the  service  rendered  its  cus- 
tomers. 

At  the  present  time  the  firm  is  spending  almost  10% 
of  the  yearly  value  of  its  export  sales  in  advertising  its 
product  in  these  countries.  The  salesmen  argue  that  if 
the  company  is  spending  such  a  large  amount  of  money 
in  creating  a  demand  for  an  item  not  yet  in  the  hands 
of  a  majority  of  the  trade,  it  should  have  a  warehouse 
in  order  to  fill  these  demands  promptly  and  to  take  care 
of  ''fill-in"  orders. 

On  the  other  hand,  the  company  is  already  losing 
money  because  of  the  expense  incident  to  introducing  this 
product  in  a  new  market.  If  it  should  lease  a  warehouse, 
the  cost  of  distribution  would  be  increased  substantially. 
Since  such  a  warehouse  would  be  established  for  the  pur- 
pose of  filling  orders  independently  of  the  factory  in  the 


440    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

United  States,  it  must  be  able  to  pass  on  the  credit  risk. 
This  would  mean  the  establishment  of  a  credit  depart- 
ment in  Copenhagen  and  the  setting  up  of  a  branch  office 
with  all  the  increased  complications  and  additional  ex- 
pense that  such  a  step  would  entail.  In  all  probability 
it  would  be  five  years  before  the  Scandinavian  trade 
would  increase  sufficiently  to  put  such  a  warehouse  on  a 
paying  basis. 

The  Sawyer  Company,  however,  is  in  good  financial 
condition  and  could  finance  such  an  undertaking,  if  it 
should  prove  desirable.  Its  present  foreign  trade  in  the 
Scandinavian  countries  is  about  $90,000  annually.  It 
appears  to  the  managers  that  there  is  a  good  future  for 
their  product  in  this  market,  since  all  indications  point 
to  the  fact  that  the  Scandinavian  people  are  becoming 
more  and  more  interested  in  crepe  paper  decorations 
and  similar  novelties.  This  class  of  merchandise  is  com- 
paratively inexpensive  and  should,  therefore,  be  within 
the  reach  of  a  large  portion  of  the  population.  In  order 
to  insure  the  building  up  of  permanent  connections,  it 
is  the  intention  of  the  company  to  develop  this  field 
direct  through  its  own  salesmen  rather  than  through 
commission  houses. 

Should  the  Sawyer  Company  establish  a  warehouse 
in  Copenhagen? 


Problem   IL3 

Fernald  Sewing  Machine  Company — Stocks  at  Selling  Offices 

The  Fernald  Sewing  Machine  Company  has  estab- 
lished exclusive  agencies  in  most  of  the  important  coun- 
tries of  the  world,  because  the  managers  of  the  firm  are 
convinced  that  as  a  rule  native  dealers  are  more  familiar 
with  the  territory  in  which  they  operate  than  the  major- 
ity of  branch  managers.  To  control  the  efforts  of  its 
agents  the  company  maintains  a  sales  director  in  each 
country  who  has  an  office  in  the  principal  city  and  travels 


FOREIGN    BRANCHES  441 

extensively,  giving  instructions  to  agents  in  the  methods 
of  selling  and  making  recommendations  to  the  home  ofl&ce 
as  to  new  agents  or  changes  in  policy,  Fernald  sewing 
machines  are  usually  sold  to  the  exclusive  agents  on  30 
to  90-day  terms,  the  dealer  securing  possession  of  the 
machines  upon  his  acceptance  of  the  draft,  but  because 
of  fluctuating  exchange  rates  and  the  uncertain  demand 
for  serving  machines,  a  number  of  the  agents  are  unwill- 
ing or  unable  to  meet  their  obligations  when  due. 

A  possible  means  of  relieving  this  condition  is  for 
the  company  to  establish  a  sales  warehouse  in  each  coun- 
try. Advocates  of  this  plan  assert  that  the  firm's  sales 
are  large  enough  to  warrant  such  a  step,  as  shown  by 
the  following  figures  for  1921 : 

France   $145,375 

United  Kingdom 663,754 

Other  Europe 99,002 

Canada    262,817 

Mexico  362,385 

Cuba 352,790 

Argentina   300,112 

Brazil 305,700 

Peru 149,841 

China   263,566 

Japan 364,636 

Australia 175,730 

Philippine  Islands 439,525 

By  estal^lishing  a  sales  warehouse  in  each  country, 
the  company  can  avoid  some  of  the  evils  resulting  from 
exchange  fluctuations.  When  a  merchant  continually 
asks  for  extensions  and  it  is  apparent  that  he  is  over- 
stocked, the  sales  director  for  this  territory  calls  on  him, 
goes  over  his  stock  and  relieves  him  of  his  excess  of  Ina- 
chines,  taking  them  back  into  the  warehouse.  If  a  dealer's 
stock  is  low,  quick  delivery  can  be  made  from  the  ware- 
house in  a  much  shorter  time  than  would  be  required  to 
secure  machines  on  an  order  cabled  to  the  United  States. 
A  sales  warehouse   also  enables  the  company  to  take 


442     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

advantage  of  fluctuations  of  exchange  by  permitting  it 
to  ship  large  numbers  of  machines  wlien  exchange  rates 
are  the  most  favorable,  selling  its  paper  to  the  banks, 
and  converting  the  foreign  currency  into  American  dol- 
lars, thereby  assisting  it  to  maintain  a  fixed  price  for  the 
sale  of  its  machines  to  its  agents. 

The  machines  in  stock  would  be  carried  by  a  bank  or 
forwarding  house.  Since  the  additional  expense  of  inter- 
est, insurance,  rent,  and  other  carrying  charges  of  a 
sales  warehouse  would  consume  a  large  part  of  the  manu- 
facturing company's  profits,  it  is  intended  that  these 
items  be  charged  to  the  dealer  according  to  the  number 
of  machines  which  he  sold.  Although  the  agents  might 
object  to  receiving  a  bill  for  $78  for  one  of  the  small 
model  sewing  machines  and  $3.75  for  sales  warehouse 
charges,  it  is  thought  that  they  will  accede  to  this 
arrangement  when  they  realize  the  benefits  it  will  bring 
to  them.  According  to  the  reports  received  from  a  ma- 
jority of  the  company's  foreign  sales  managers,  this  plan 
would  be  of  material  aid  in  increasing  sales  abroad.  The 
biggest  factor  against  establishing  a  sales  warehouse  is 
that  many  business  men  who  consider  the  present  unfa- 
vorable exchange  and  trading  conditions  as  purely  tem- 
porary, contend  that  under  these  circumstances  it  would 
not  pay  the  Fernald  Company  to  establish  sales  ware- 
houses. 

Should  the  Fernald  Sewing  Machine  Company  carry 
a  stock  in  each  of  the  most  important  countries  in  its  for 
eign  field? 


FOREIGN  BRANCHES  443 

Problem  114 
Russell  Company — Closing  of  Foreign  Office 

During  the  past  two  years  the  Milan  ofl&ce  of  the  Rus- 
sell Company  has  shown  a  heavy  loss.  This  office  was 
established  prior  to  the  World  War  when  the  demand 
in  Italy  for  pipe  fittings,  brass  and  iron  valves,  and  pipe 
tools,  such  as  are  manufactured  by  the  Eussell  Company, 
was  substantial  and  growing.  Because  of  the  building 
of  new  factories  and  the  remodeling  of  old  ones,  Italy's 
industrial  demand  for  this  class  of  material  was  large 
and  although  competition  with  Germany,  and  to  a  certain 
extent  with  England,  was  felt  by  all  American  manu- 
facturers of  this  line,  the  Russell  Company  shipped 
$300,000  worth  of  merchandise  into  this  country  each 
year.  Now,  however,  conditions  are  unfavorable  to  the 
export  of  this  class  of  material  from  the  United  States 
and  the  Italian  business  of  this  company  has  fallen  to 
less  than  $30,000  a  year.  The  temporary  closing  of  its 
Milan  office  is  therefore  under  consideration  by  the  Rus- 
sell Company. 

Shortly  after  the  termination  of  the  World  War, 
Socialists  took  over  the  operation  of  a  number  of  fac- 
tories in  northern  Italy.  The  building  of  new  factories 
and  the  remodeling  of  old  ones  was  thereby  stopped  in 
one  of  the  most  prosperous  industrial  regions  in  the 
countr5^  Business  in  Italy  is  stagnant  to  a  certain  extent 
today  and  many  places  are  running  on  part  time  only 
or  shut  down  completely.  The  entire  country  is  now 
undergoing  a  business  depression  and,  largely  because 
of  the  chaotic  political  situation  in  Europe,  it  is  difficult 
to  tell  when  a  revival  will  occur. 

The  exchange  situation  in  Italy  is  likewise  a  big 
obstacle  to  the  importing  of  pipe  fittings  and  similar 
products  from  the  United  States.  The  value  of  the  lira 
has  declined  from  19.3  cents,  or  par,  until  in  the  past  two 
years  it  has  been  quoted  anywhere  from  5c  to  3.5c.  There 
is  some  talk  of  redeeming  the  paper  lira  at  its  present 
value  instead  of  at  par,  but  no  matter  what  currency  plan 


444    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

is  advocated,  the  time  at  which  deflation  will  occur  is 
only  a  conjecture. 

Orders  are  continuing  to  fall  off  at  the  Milan  office 
and  the  salesforce  is  practically  idle.  There  is  appar- 
ently little  hope  of  improvement  in  the  immediate  future. 
To  continue  this  office  might  afford  the  Russell  Company 
some  degree  of  advertising,  but  advertising  direct  by 
mail  and  the  occasional  visits  of  missionary  salesmen 
would  cost  little  compared  with  the  expense  of  maintain- 
ing its  present  local  office.  The  organization  of  the  Rus- 
sell Company  in  Milan,  however,  is  made  up  of  Italians 
who  have  been  trained  in  the  company's  factory  in  the 
United  States.  These  men  know  both  the  product  they 
are  selling  and  the  people  with  whom  they  are  dealing. 
It  would  be  impossible  to  transfer  these  men  to  other 
countries  because  they  are  not  fitted  for  the  work  and 
because  they  are  not  willing  to  leave  their  o^vll  coun- 
try. If  the  office  were  closed  these  men  would  undoubt- 
edly find  positions  with  competitors  and  an  entirely  new 
organization  would  probably  have  to  be  developed  when 
the  company  decided  that  the  time  had  arrived  to  reopen 
its  Milan  office. 

German  competition  is  becoming  keener  every  day, 
since  these  manufacturers  have  the  advantage  of  being 
nearer  to  the  Italian  market,  their  exchange  rates  are 
unfavorable  and  their  production  costs  are  lower.  To 
withdraw  from  the  market  temporarily  at  such  a  time 
would  give  competitors  a  free  hand  to  build  up  a  busi- 
ness with  the  old  customers  of  the  Russell  Company.  In 
all  probability  it  will  be  difficult  for  the  company  to 
regain  a  firm  hold  on  the  Italian  market  when  business 
conditions  improve  if  it  abandons  this  office  at  the  present 
time. 

Should  the  Russell  Company  close  its  Milan  office? 


FOREIGN    BRANCHES  445 

Problem  115 

Hoffman    Oil    Company — Powers    of    Branch    Manager    and 
Organization  of  Branch 

It  has  been  the  practice  of  the  Hoffman  Oil  Company 
to  limit  the  powers  of  its  branch  managers  to  matters 
directly  connected  with  selling,  leaving  all  questions  of 
credit  and  finance  to  be  decided  at  the  home  office  in 
New  York  City.  It  was  thought  that  to  be  a  good  sales- 
man and  a  branch  manager  a  man  must  be  optimistic 
and  take  a  sympathetic  interest  in  his  customers'  wel- 
fare. These  qualities  were  considered  opposed  to  the 
attitude  of  conservatism,  caution,  and  the  methods  of 
analysis  so  necessary  in  the  credit  end  of  the  business. 
This  practice  of  the  company  was  strengthened  by  the 
attitude  of  the  branch  managers  themselves,  several  of 
whom  frankly  said  that  they  did  not  care  to  be  bothered 
with  the  petty  details  of  looking  up  a  man's  financial 
rating  but  preferred  to  devote  their  energies  to  the  build- 
ing up  of  a  large  sales  volume,  on  which  their  commis- 
sions depended.  If  an  order  had  to  be  refused  because 
the  customer  did  not  have  a  sound  financial  rating  and 
could  not  pay  cash,  then  these  managers  preferred  to 
have  the  blame  for  this  refusal  placed  on  the  credit 
department  in  New  York  rather  than  on  their  own  shoul- 
ders. 

In  matters  directly  connected  with  sales,  the  branch 
managers  of  the  Hoffman  Company  have  been  given  a 
free  hand.  They  have  full  authority  in  the  matter  ot 
selecting  and  hiring  salesmen,  and  no  man  is  sent  to  a 
branch  without  the  approval  of  the  manager  of  that 
branch.  These  men  also  select  the  local  agents  who 
represent  the  company  in  their  district  and  enter  into  a 
contract  with  these  agents  on  behalf  of  their  firm.  They 
handle  all  matters  concerned  with  the  control  and  disci- 
pline of  the  salesf  orce  and  also  have  charge  of  the  small 
warehouse  and  oil  storage  tanks  which  are  connected 
with  their  branches.    Each  manager  maintains  a  statis- 


446    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

tical  record  of  the  amount  of  each  sale,  the  kind  of  oil 
sold,  and  the  total  sales  to  date  of  each  customer,  for  the 
purpose  of  judging  whether  or  not  the  company  is  getting 
its  share  of  the  business  and  to  assist  the  salesmen  in 
securing  orders  by  giving  them  a  past  history  of  the 
company's  relations  with  these  merchants.  The  branch 
manager  handles  all  correspondence  with  customers  and 
determines  the  amount  of  dealer  help  and  assistance  to 
give  to  each  merchant  in  moving  his  stocks. 

During  the  past  few  years  the  Hoffman  Oil  Company 
has  had  considerable  difficulty  with  credit  and  collections 
arising  from  poor  business  conditions  existing  in  most 
foreign  countries  and  the  fluctuations  of  exchange  rates. 
This  corporation  exports  different  grades  of  machine 
and  motor  oils,  which  it  sells  direct  to  dealers  or  through 
agents  in  the  territory  not  covered  by  its  own  salesforce. 
Many  of  its  customers  buy  oil  in  comparatively  small 
quantities,  and  their  financial  rating  is  frequently  not  of 
the  highest  order.  It  has  often  been  necessary  to  extend 
credit  to  these  dealers  in  order  to  secure  a  sale.  A  branch 
manager  has  the  credit  ratings  of  old  customers,  which 
have  been  furnished  him  by  the  credit  department  and 
which  are  brought  up  to  date  from  time  to  time,  but  when 
a  new  customer  applies  for  extended  terms  his  applica- 
tion is  forwarded  to  the  home  office  in  the  United  States. 
A  considerable  amount  of  time  frequently  elapses  before 
a  reply  can  be  received,  and  a  sale  may  be  lost.  The  com- 
pany also  has  had  several  lawsuits  arising  from  the 
abuse  of  its  credit  terms  and  the  refusal  of  agents  to  live 
up  to  their  contracts.  In  each  of  these  instances  the  man- 
ager had  been  compelled  to  delay  taking  action  to  protect 
the  interests  -of  his  compan}'  until  he  had  secured  the 
power  of  attorney  from  the  New  York  office. 

To  overcome  these  obstacles  the  directors  are  contem- 
plating giving  the  branch  managers  more  power.  The 
argument  has  been  advanced  that  l)ranch  managers  are 
on  the  ground,  are  thoroughly  familiar  with  local  con- 
ditions in  the  foreign  field,  and  should  make  the  credit 
decisions,  particularly  in  the  case  of  dealers  who  make 


FOREIGN    BRANCHES  447 

small  purchases.  The  branch  managers  in  Buenos  Aires, 
Shanghai,  and  London  have  always  exercised  more  or 
less  authority  over  the  credit  situation  in  their  territo- 
ries, for  their  ability  to  size  up  the  financial  standing  of 
their  customers  has  been  recognized  and  their  advice 
usually  followed  by  the  credit  department.  In  fact,  the 
experiment  has  already  been  made  of  allowing  the  Lon- 
don manager  to  handle  most  of  the  credit  decisions  aris- 
ing in  England,  and  the  results  have  been  satisfactory. 
The  customs  and  manner  of  doing  business  vary  in  the 
different  countries,  and  the  branch  manager,  because  of 
his  intimate  association  with  business  conditions,  can 
frequently  pass  on  a  situation  with  a  clearer  understand-, 
ing  than  can  the  credit  department. 

Although  some  of  the  other  branch  managers  are  not 
so  well  qualified  to  handle  matters  of  credit  as  are  those 
in  the  Buenos  Aires,  Shanghai,  and  London  offices,  these 
men  are  capable  executives  and  with  a  little  experience 
and  training  should  be  able  to  handle  manj^  of  the  minor 
credit  matters.  In  the  case  of  customers  on  whom  they 
do  not  feel  qualified  to  pass  judgment,  the  credit  depart- 
ment should  be  able  to  handle  the  matter  for  them.  It 
has  been  suggested  that  each  of  these  branches  is  in  real- 
ity a  little  business  concerned  with  its  own  particular 
problems,  and  what  the  company  needs  in  order  to  suc- 
ceed is  a  broad  business  executive  at  the  head  of  each 
branch  rather  than  a  foreign  sales  manager.  In  the  case 
of  a  company  selling  motor  cars,  pianos,  or  some  other 
product  of  high  unit  value,  the  directors  are  convinced 
that  the  credit  manager  with  banking  experience  should 
pass  on  all  questions  connected  with  terms,  loans,  and 
other  financial  matters ;  but  that  in  the  case  of  the  Hoff- 
man Oil  Company,  where  the  unit  sales  are  frequently 
small,  it  might  be  feasible  to  give  at  least  a  part  of  this 
power  to  the  branch  manager.  With  sales  varying  from 
$5  to  nearly  $10,000,  there  is  a  possibility  that  a  division 
might  be  effected,  allowing  the  branch  manager  to  pass 
on  all  credit  affecting  sales  of  less  than  $500  and  having 
the  credit  department  take  care  of  all  sales  above  this 
figure. 


448     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  directors  are  also  contemplating  giving  each 
branch  manager  the  power  of  attorney,  so  that  he  could 
take  immediate  action  in  cases  where  customers  or  agents 
were  clearly  trying  to  evade  their  responsibility  to  the 
company.  This  step  would  also  give  the  managers  a 
greater  feeling  of  confidence,  since  they  would  not  only 
be  made  responsible  for  conditions  in  their  territory 
but  would  also  have  the  authority  to  take  whatever  step'^' 
were  needed  to  protect  the  interests  of  the  firm. 

Should  the  Hoffman  Oil  Company  give  its  branch 
managers  the  power  to  pass  on  questions  of  credit?  If 
so,  should  this  power  be  limited  merely  to  small  orders? 

Should  the  firm  also  give  these  managers  the  power 
of  attorney? 


Problem  116 

Faxon  Typewriter  Company — Power,   Duties,   and  Compensa- 
TioN  OF  Branch  Managers 

In  1920  and  1921  the  Faxon  Typewriter  Company,  like 
many  other  American  manufacturers,  suffered  the  pre- 
vailing slump  in  foreign  sales  as  compared  with  the 
period  during  the  World  War.  Although  the  results  for 
these  two  years  were  favorable  when  compared  with  the 
company's  export  sales  for  1912  and  1913,  members  of 
the  firm  were  sorely  disappointed  in  the  falling  off  of 
the  foreign  sales  volume,  particularly  since  this  decrease 
was  accompanied  by  a  decrease  in  the  percentage  of 
profit.  The  activities  of  the  export  organization  were 
subjected  to  a  thorough  scrutiny  in  an  attempt  to  learn 
the  causes  for  this  lessening  of  sales  and  percentage  of 
profit  in  the  export  trade.  The  distribution  of  Faxon 
typewriters  by  foreign  countries  for  these  two  years  was 
as  follows: 


FOREIGN    BRANCHES  449 

1920  1921 

Belgium    $    218,711  $201,907 

France 1,020,857  739,588 

Italy 365,948  370,954 

Netherlands   247,717  291,106 

Poland  and  Danzig 58,926  131,000 

Spain 260,462  385,727 

Switzerland    112,619  193,826 

Canada   454,567  470,249 

Mexico 153,828  317,226 

Cuba    161,170  155,745 

Argentina 186,967  328,675 

Brazil    285,322  191,248 

Chile   20,672  124,949 

Peru 49,029  63,137 

China 59,296  103,195 

British  India 187,867  382,323 

Dutch  East  Indies 76,470  163,705 

Japan    84,308  86,045 

Australia    106,877  236,618 

Philippine  Islands 46,174  133,686 

British  South  Africa 70,898  149,387 

Scandinavian  Countries 382,582  172'398 

At  present  each  manager  of  a  foreign  branch  of  the 
Faxon  Typewriter  Company  has  authority  to  fix  the 
price  at  which  machines  will  be  sold  to  dealers.  Compe- 
tition among  typewriter  companies  is  keen,  and  the  firm 
realizes  that  if  its  machines  are  to  find  ready  sale  its 
prices  must  be  adjusted  to  market  conditions.  This  sit- 
uation was  particularly  well  illustrated  when  at  the  con- 
clusion of  the  World  War  several  governments  dumped 
large  quantities  of  typewriters  of  all  makes  on  the  mar- 
ket. Many  of  these  machines  were  new  or  practically  so 
and  it  was  obvious  that  by  price  reductions  the  Faxon 
Company  must  assist  its  dealers  in  meeting  this  form 
of  competition.  It  was  believed  at  this  time  that  changes 
in  price  were  best  made  by  the  branch  manager  who 
would  be  familiar  with  and  in  close  touch  with  local  con- 
ditions. In  accepting  a  second-hand  machine  in  partial 
payment  for  a  new  Faxon,  the  question  of  the  price  has 
an  important  bearing  on  the  dealer's  policy  and  since 
conditions  varied  in  the  different  countries,  this  was  an 


450     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

added  argument  in  favor  of  allowing  each  branch  man- 
ager to  adjust  prices  to  meet  local  conditions. 

The  Faxon  Company  receives  Government  reports  of 
the  total  number  of  typewriters  exported  to  each  country 
and  holds  its  branch  managers  strictly  responsible  for 
getting  their  share  of  this  business.  No  attempt  is  made 
to  tell  a  manager  what  part  of  his  territory  is  not  yield- 
ing its  full  possibilities.  In  many  instances  the  sales  in 
one  small  district  or  industrial  center  depend  upon  a 
local  wave  of  prosperity  or  temporary  boom  that  would 
spend  itself  before  instructions  could  arrive  from  the 
United  States.  The  development  of  the  company's  busi- 
ness in  each  territory  is  therefore  left  to  the  initiative 
and  judgment  of  the  local  manager,  who  usually  has 
made  a  number  of  connections  or  formed  friendships 
with  the  heads  of  banks  and  other  houses  which  give  him 
an  opportunity  to  secure  reliable  information  and  to 
adjust  his  efforts  to  the  pulse  of  the  community.  Infor- 
mation received  in  this  way  also  gives  him  a  basis  on 
which  to  judge  the  plausibility  and  accuracy  of  his  deal- 
er's stories. 

Since  each  branch  manager  is  held  responsible  for 
sales  performance  in  his  territory,  he  has  the  power  to 
grant  and  .revoke  exclusive  agency  rights.  To  hold  a 
branch  manager  responsible  for  results  without  author- 
ity to  secure  those  results  is  held  by  the  export  manager 
to  be  contrary  to  the  best  practice  of  organization. 
Adx^ertising  circulars  and  other  forms  of  dealer  helps 
are,  therefore,  not  distributed  by  the  company  from  the 
United  States,  but  are  sent  out  by  the  branch  manager 
according  to  the  needs  of  each  dealer. 

A  branch  manager  of  the  Faxon  Company  receives  a 
salary  large  enough  to  cover  living  expenses  for  the 
average  American  family  abroad;  his  traveling  expenses 
are  paid  by  the  company  and  in  addition  he  receives  a 
small  percentage  on  all  sales.  An  exception  has  been 
made  to  this  rule  in  the  case  of  two  or  three  of  its  branch 
managers  whom  the  company  has  found  to  be  erratic 
workers.  Although  these  men  are  extremely  efficient  for 
a  period  they  have   occasional  lapses;   yet   they  know 


FOREIGN    BRANCHES  451 

conditions  in  their  territories  and  are  too  valuable  to 
lose.  To  induce  them  to  put  forth  their  best  efforts  the 
company  has  arranged  to  pay  all  traveling  expenses  and 
compensate  them  not  with  a  salary  but  with  more  than 
the  normal  percentage  on  all  sales  made  in  their  terri- 
tory. 

Ha\dng  completed  its  study  of  the  export  situation 
the  first  recommendation  made  by  the  investigating  com- 
mittee is  that,  in  order  to  achieve  a  iixed  percentage  of 
selling  expenses  the  Faxon  Typewriter  Company  should 
pay  all  its  branch  managers  solely  on  a  percentage  of 
sales.  This  would  focus  the  efforts  of  all  branch  man- 
agers on  increasing  their  sales,  but  opponents  to  this 
measure  have  pointed  out  that  these  men  must  not  only 
secure  sales  but  must  also  handle  claims  and  adjust- 
ments and  supervise  the  salesmen  in  missionary  work. 
Some  export  managers  have  even  gone  so  far  as  to  say 
that  the  proposed  method  of  compensation  is  not  suited 
to  branch  managers  at  all  but  only  to  travelers  whose 
entire  expenses  are  paid  by  the  company  and  whose  com- 
missions are  therefore  practically  clear. 

It  has  also  been  recommended  that  the  company  should 
curtail  the  power  of  its  branch  managers  to  fix  the 
price  at  which  machines  are  sold  to  the  dealers.  Any 
branch  manager  can  sell  typewriters  if  he  cuts  the  price 
low  enough  but  the  company  is  in  the  foreign  field  for 
profits,  not  merely  for  a  large  volume  of  sales,  and  price- 
cutting  must  be  curtailed  if  this  end  is  to  be  achieved. 
On  the  other  hand,  branch  managers  report  that  if  they 
are  shorn  of  their  power  to  adjust  prices  the  company 
cannot  hold  its  position  in  the  foreign  field  in  competi- 
tion with  firms  whose  foreign  managers  have  some  con- 
trol over  prices.  Even  at  present  branch  managers  are 
careful  not  to  reduce  prices  unnecessarily  and  advise  all 
dealers  not  to  resort  to  predatory  price-cutting,  since  in 
the  long  run  this  policy  tends  to  reduce  the  profits  of 
everyone. 

It  was  further  advised  that  the  company  should  have 
complete  charts  of  its  sales  in  each  division  of  every 
foreign  country  and  that  failure  of  a  branch  manager 


452    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

to  secure  100%  distribution  of  his  product  in  each  part 
of  his  territory  would  call  for  a  complete  and  immediate 
explanation.  This  plan  also  met  with  opposition  in  the 
assertion  that  if  the  home  office  of  the  company  had  such 
an  intimate  knowledge  of  trade  conditions  in  all  parts 
of  Austria,  Poland,  Mexico,  and  the  other  countries  in 
which  Faxon  Machines  were  sold,  there  would  be  no 
need  of  maintaining  branch  managers  in  the  lield. 

As  a  result  of  this  dissension  and  difference  of  opinion 
in  the  company  itself  no  action  has  been  taken;  in  fact 
the  firm  is  at  a  loss  as  to  what  policies  it  should  pursue. 


Problem  117 

Gendron  Press  and  Paper  Company — Should  Branch  Managers 

Fix  the  Price? 

The  Gendron  Press  and  Paper  Company,  which  has 
been  taken  over  by  new  management,  is  undergoing  a 
reorganization.  This  firm  sells  high-grade  book  paper, 
ledger,  bond,  and  linen  writing  paper,  some  news  print, 
and  Black  Hawk  printing  machines.  Foreign  branches 
are  located  in  Sydney,  Australia,  Mexico  City,  Havana, 
Buenos  Aires,  London,  and  Prague.  The  managers  of 
these  branches  have  been  confining  their  attention  to 
building  up  a  good  salesforce,  laying  out  efficient  routes, 
making  friends  with  customers  and  prospective  custom- 
ers, and  securing  as  large  a  volume  of  sales  as  is  possible 
under  existing  conditions.  In  the  past  the  home  office 
has  fixed  all  prices,  passed  on  credits,  set  the  salaries 
of  all  salesmen,  and  controlled  the  amount  of  stock  car- 
ried at  each  branch.  It  has  adhered  strictly  to  a  one- 
price  policy  in  both  domestic  and  foreign  sales. 

The  new  president  and  general  manager  is  a  strong 
advocate  of  decentralization,  particularly  in  foreign 
countries  where  branches  are  often  located  at  remote 
points.  It  is  his  opinion  that  many  houses  quote  c.  i.  f. 
prices  for  goods  delivered  at  a  foreign  port  without  tak- 
ing into  account  local  conditions  in  each  country.    Com- 


FOREIGN    BRANCHES  453 

petition,  freight,  and  the  longer  investment  of  capital 
necessary  because  of  the  length  of  ocean  voyages  and  the 
credit  terms  granted,  all  have  their  effect  upon  the  price 
which  should  be  charged.  About  15%  to  20%  of  the  com- 
pany's sales  abroad  are  special  orders,  the  rest  being 
sold  by  the  branch  from  its  own  stock  as  though  it  were 
an  independent  wholesaler.  Many  foreign  merchants 
are  not  accustomed  to  a  one-price  standard  and  fre- 
quently like  to  receive  concessions  on  the  ground  of 
friendship,  competition,  or  for  other  reasons.  The  new 
president  proposes  to  make  each  branch  manager  re- 
sponsible for  the  price  policy  and  the  price  list  in  his 
territory.  Since  the  price  quoted  should  depend  upon 
the  terms  given  and  the  risk  involved,  it  is  also  planned 
to  give  the  branch  manager  the  power  of  granting  credit. 
The  fact  that  his  commission  depends  upon  the  profit  he 
shows  at  the  end  of  the  year  is  expected  to  act  as  a  brake 
upon  unwarranted  cutting  of  prices  and  granting  of 
credit. 

Under  this  plan  the  home  office  of  the  Gendron  Com- 
pany will  have  complete  control  over  all  expenses, 
branch  managers  being  required  to  keep  within  pre- 
scribed limits  which  cannot  be  exceeded  without  author- 
ity. The  originator  of  this  plan  expects  to  have  a 
monthly  report  of  expenses  from  each  branch  and  to 
hold  each  manager  strictly  to  account  for  the  economical 
operation  of  his  territory.  The  home  office  of  the  com- 
pany is  also  to  determine  the  amount  of  investment  in 
stock  allowed  to  each  branch,  the  limit  being  based  on 
past  sales  in  each  territory.  By  controlling  the  amount 
of  receivables  outstanding  in  proportion  to  the  total 
sales,  it  is  expected  that  the  company  will  be  able  to 
exercise  control  over  the  amount  of  credit  given. 

This  plan  has  met  with  considerable  opposition 
because  it  places  so  much  power  in  the  hands  of  the 
branch  managers,  some  of  whom  have  not  received  much 
training  and  experience  except  in  foreign  sales  and  may 
not  use  good  judgment  in  selecting  the  customers  to 
whom  credit  is  allowed. 

Should  the  Gendron  Press  and  Paper  Company  allow 
its  branch  managers  to  fix  prices  and  pass  on  credit? 


154    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  118 
Federated  Paper  Company — Transfer  of  Branch  Managers 

Whether  to  fill  the  vacancy  of  the  office  of  branch  man- 
ager in  Mexico  City  by  the  transfer  of  its  branch  man- 
ager in  Santiago,  or  whether  to  develop  a  new  man  to  fill 
the  position,  is  a  problem  facing  the  Federated  Paper 
Company.  This  firm  exports  paper,  printing  machinery, 
typewriters,  and  office  supplies,  operating  branches  in 
the  majority  of  the  Latin  American  countries.  One  of 
its  most  important  branches  is  in  Mexico  City,  the  sales 
of  which  are  approximately  one  and  one-fifth  times  those 
of  Buenos  Aires,  the  next  largest  branch.  The  manager 
of  the  latter  branch  has  married  a  native  Argentinean, 
has  made  many  friends  in  Buenos  Aires,  and  is  satisfied 
to  remain  where  he  is.  The  sales  volume  of  the  Santiago 
branch  is  about  two-tliirds  as  large  as  that  of  the  Mexico 
City  district ;  its  manager  is  progressive ;  and,  if  a  trans- 
fer is  to  be  made  to  fill  the  vacancy,  the  company  is  con- 
vinced that  he  should  be  the  one. 

It  is  the  company's  policy  to  fill  vacancies  from  its 
own  organization,  either  by  transferring  a  man  from 
another  branch  or  by  developing  a  subordinate  to  fill  the 
position.  The  firm's  managers  are  paid  salaries  large 
enough  to  take  care  of  their  living  expenses  and  receive 
also  a  percentage  of  the  profits  derived  from  their  terri- 
tories. The  branch  manager  in  Santiago  is  anxious  to 
educate  his  children  in  the  United  States,  but  his  present 
salary  scarcely  permits  such  a  step.  In  order  to  induce 
him  to  remain  in  Santiago  and  not  seek  another  position, 
the  company  must  pay  him  a  larger  salary  in  proportion 
to  the  amount  of  business  in  his  district  than  is  paid 
other  branch  managers.  This  salary  would  be  based  on 
the  company's  estimate  of  the  future  sales  in  this  terri- 
tory rather  than  on  the  actual  business  secured  at  the 
present  time.  Since  the  position  in  Mexico  City  pays  a 
larger  salary  than  the  one  in  Santiago,  the  transfer 
would  be  regarded  by  this  man  in  the  light  of  a  promo- 
tion. Since  a  large  part  of  the  business  in  Latin  America 


FOREIGN    BRANCHES  456 

depends  upon  friendship  and  knowledge  of  the  habits 
and  customs  of  buyers,  there  is  a  distinct  advantage  to 
the  company  in  having  its  managers  remain  in  the  terri- 
tory which  they  have  helped  to  develop. 

Ordinarily  each  manager  has  a  subordinate  who  is 
training  to  take  over  the  work  should  the  occasion  arise, 
but  the  sudden  resignation  of  the  manager  in  Mexico 
City  because  of  ill-health  left  the  firm  without  a  properly 
trained  assistant  to  take  his  place.  The  assistant  man- 
ager, who  is  filling  the  position  at  the  present  time,  is  a 
man  about  thirty  years  old  who  has  had  some  experience 
as  a  salesman  in  the  Tampico  district;  he  has  not  had 
much  training  in  an  executive  capacity.  He  has  been 
assistant  manager  for  six  months,  but  during  that  time 
his  work  has  been  more  that  of  a  head  salesman  than  of 
an  administrative  oflficer.  He  undoubtedly  possesses 
ability  of  the  first  order  and  with  a  little  more  experi- 
ence would  make  a  capable  branch  manager,  but  the  com- 
pany has  never  before  been  willing  to  place  in  the  posi- 
tion of  manager  a  man  with  so  little  practice  in  handling 
administrative  matters. 

Should  the  company  promote  the  assistant  branch 
manager  to  the  position  of  manager  in  Mexico  City?  If 
so,  should  it  raise  the  salary  of  its  manager  in  Santiago? 


CHAPTER  X 


FINANCING,  CREDITS  AND  COLLECTIONS 
IN  EXPORT  TRADE 

FEW  subjects  of  interest  to  the  exporter  have  been 
so  frequently  and  copiously  discussed  in  recent 
years  as  export  credits  and  the  financing  of  for- 
eign trade.  The  intricate  financial  structure,  which  re- 
ceived little  notice  during  its  period  of  smooth  operation, 
reacted  so  violently  to  the  strains  and  stress  of  the  war 
period  that  not  only  exporters  but  also  the  financial  and 
business  community  as  a  whole  were  compelled  to  give  it 
more  serious  consideration.  Throughout  the  period  of 
dislocation  of  the  exchanges  and  for  perhaps  many  years 
to  come,  the  exporter  will  be  confronted  by  many  prob- 
lems which  seem  today  to  be  almost  as  far  from  solution 
as  at  the  height  of  the  war.  The  exporter  realizes  that 
the  highly  unusual  conditions  which  even  now  prevail  are 
the  results  of  a  great  number  of  economic,  social,  and 
political  conditions  over  which  neither  he  nor  the  bank- 
ing community  has  control.  Nevertheless,  a  vicious 
circle  has  frequently  been  formed — countries  needing 
goods  could  not  get  them  because  financial  arrangements 
were  upset,  because  they  could  not  pay  for  them.  They 
could  not  change  the  financial  conditions  without  such 
goods  and  equipment  to  place  them  on  a  productive  basis. 
The  need  for  financing  the  individual  importer  is  based 
upon  two  primary  considerations.  The  first  is  the  credit 
basis  of  international  transactions.  No  matter  what  the 
terms  of  sale,  a  certain  amount  of  credit  enters  into 
every  export  transaction.  Very  rarely  does  a  foreign 
buyer  pay  cash  in  advance  for  his  goods,  and  even  if  he 
should,  there  is  the  probability  that  the  cash  would  have 
been  secured  on  the  basis  of  his  credit  standing.  The 
bulk  of  international  transactions  is  not  carried  on  upon 

466 


EXPORT    FINANCING    AND    CREDITS  457 

a  cash  basis.  The  various  distributors  who  purchase  for 
resale  are  accustomed  to  purchasing  on  a  credit  basis  just 
as  dealers  in  the  United  States.  The  competition  of  for- 
eign manufacturers  renders  it  necessary  for  Americans 
to  comply  with  the  general  trade  customs,  in  order  that 
they  shall  not  be  placed  at  a  disadvantage.  Secondly, 
the  policy  of  domestic  concerns  of  using  bank  credit  to 
supplement  working  capital  renders  them  unable  to  do 
the  amount  of  foreign  business  which  they  desire  without 
supplementing  working  capital.  Through  various  de- 
vices, which  have  been  built  up  through  the  experience 
of  centuries,  it  is  possible  for  the  manufacturer  selling 
to  foreign  markets  to  grant  the  credits  necessary  to  se- 
cure foreign  business  without  impairing  his  working  capi- 
tal. Private  bankers,  national  banks,  trust  companies, 
and  acceptance  banks,  together  with  the  Federal  Reserve 
Banks  as  rediscount  banks,  furnish  ample  opportunity 
for  manufacturers  of  staple  goods,  at  least  for  those  who 
are  otherwise  financially  strong,  to  discount  bills  to  ad- 
vantage. The  amount  of  financing  needed  depends  of 
course  upon  the  volume  of  business  which  the  concern 
desires  to  do  and  also  upon  the  average  length  of  the 
credits  granted. 

The  general  credit  policy  of  the  exporter  is  usually 
determined  by  the  administrative  officers  rather  than  by 
the  export  'manager,  primarily  because  it  involves  the 
entire  financing  plan  of  the  concern.  Whether  credits 
should  be  granted  or  not  is  a  question,  therefore,  which 
is  often  decided  by  men  who  have  not  a  sufficiently  broad 
knowledge  of  the  needs  of  the  export  market  and  who 
are  inclined  to  hamper  the  operations  of  the  export 
department  by  too  narrow  a  policy.  There  is  of  course 
the  common  conception  that  domestic  credits  are  short 
and  that  foreign  credits  are  long;  and  that  unless  we 
sell  goods  on  very  long  time,  it  is  impossible  to  do  for- 
eign business  successfully.  Yet  a  close  examination 
of  the  variations  in  credit  terms  shows  that,  taking  into 
account  rapidity  of  turnover  of  goods  and  length 
of  time    required    for    shipment    and    communication, 


458    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

foreign  credit  terms  are  based  on  no  different  fun- 
damental considerations  than  domestic  credits.  The 
general  credit  policy  of  the  concern  will  in  part  determine 
what  credit  terms  are  to  be  granted  foreign  buyers. 
While  in  individual  cases  the  credit  standing  of  the  appli- 
cant will  be  the  basis  for  decision,  it  is  usually  a  part  of 
general  credit  policy  to  give  only  certain  terms  to  appli- 
cants of  approved  standing. 

The  credit  terms  which  are  granted  in  foreign  trade 
may  be  grouped  in  three  divisions — first,  those  in  which 
payment  is  required  before  shipment  or  cash  is  required 
with  order.  Such  terms  contain  less  of  the  credit  ele- 
ment than  the  other  cases.  There  are  several  plans 
which  may  be  used  to  make  settlement  in  such  a  way, 
either  by  payment  of  cash  in  advance  without  special  ar- 
rangement or  by  the  opening  up  of  credit  against  which 
the  exporter  may  draw  upon  shipment  of  goods.  The 
second  group  includes  terms  in  which  payment  is  made 
either  at  the  time  of  the  passing  of  the  title  of  the  goods 
or  at  the  time  of  the  receipt  of  the  goods.  In  most  export 
transactions,  title  to  the  bill  of  lading  gives  title  to  the 
goods  and  the  surrender  of  the  bill  of  lading  under  cer- 
tain agreed  conditions  involves  surrender  of  the  title  to 
the  goods.  In  this  class  of  terms,  the  documents  are  sur- 
rendered against  payment;  while  nominally  this  may  be 
before  the  receipt  of  goods  if  the  bill  of  lading  and  other 
documents  arrive  at  the  negotiating  bank  before  the 
goods  arrive,  in  practice  banks  frequently  do  not  present 
the  draft  for  payment  under  such  terms  until  after  the 
goods  have  reached  their  destination  and  been  inspected. 
The  third  class  of  terms  includes  those  in  which  payment 
is  made  at  some  time  after  the  receipt  of  the  goods  by 
the  importer.  The  importer  may  secure  the  goods  upon 
acceptance  of  a  draft  or  upon  open  account.  With  all 
the  possible  variations  in  length  of  time  and  in  terms  of 
payment,  it  is  possible  to  choose  a  great  variety  of  terms 
involving  all  degrees  of  credit  risk  ranging  from  none,  as 
in  cash  in  advance,  to  the  great  risk  of  manufacture  and 
shipment  of  goods  against  open  account,  in  which  ther^ 


EXPORT    FINANCING    AND    CREDITS  459 

is  neither  a  definite  term  of  settlement  nor  a  negotiable 
instrument  to  serve  as  evidence  of  the  obligation  of  the 
foreign  buyer. 

The  choice  of  proper  terms  for  a  concern  and  the  ex- 
tension of  such  credit  privileges  to  individual  applicants 
are  the  great  problems  of  the  export  credit  department. 
Credit  terms  are  affected  not  only  by  the  need  for  credit 
based  upon  the  rate  of  turnover  and  difficulty  of  com- 
munication, but  also  in  some  areas  upon  competition. 
Competing  nations  make  concessions  in  the  form  of  more 
liberal  terms  rather  than  in  prices.  The  credit  policy  of 
the  business  concerns  of  a  nation  is  also  affected  by  the 
exchange  situation  in  foreign  nations.  The  foreign  buyer 
is  interested  particularly  in  the  number  of  francs,  marks, 
or  pounds  which  he  has  to  pay  for  the  goods  which  he 
purchases  from  the  United  States.  As  a  consequence,  he 
is  less  inclined  to  pay  when  exchange  conditions  bring  it 
about  that  he  has  to  pay  more  francs,  marks,  or  pounds. 
He  attempts  to  delay  payment  until  fluctuations  in  the 
other  direction  will  not  necessitate  payment  of  an  extra 
sum  because  of  unfavorable  exchange.  The  principles 
and  methods  of  passing  upon  credit  applications  from 
foreign  customers  do  not  differ  in  essentials  from  those 
governing  the  domestic  credit  man.  Various  sources  of 
credit  information  are  available  and  the  unsatisfactory 
character  of  much  of  this  information  is  offset  in  practice 
by  greater  conservatism  in  the  granting  of  credit.  Many 
of  the  commercial  disputes  in  export  trade  arise  of  course 
in  connection  with  the  settlement  of  accounts.  There  are 
many  intricate  problems  relating  to  collection  of  overdue 
accounts  in  foreign  trade.  Legal  requirements  vary  ac- 
cording to  countries.  There  are  some  countries  in  which 
extra-territorial  jurisdiction  prevails,  but  in  most  coun- 
tries litigation  in  order  to  collect  accounts  must  be  car- 
ried on  in  native  courts  and  with  the  customary  prejudice 
against  foreigners.  Claims  for  adjustments  and  rejec- 
tions of  goods  present  problems  of  peculiar  difficulty  be- 
cause of  the  distance  of  the  exporter  from  the  buyer. 
Because  of  these  difficulties  the  arbitration  agencies  are 


460     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

in  the  process  of  development.  The  American  Chambers 
of  Commerce  and  special  arbitration  bodies  are  being  or- 
ganized, and  some  of  them  are  in  operation,  for  the  pur- 
pose of  assuring  both  parties  to  an  export  transaction 
that  a  commercial  dispute  will  be  handled  impartially. 

A.  Financing  of  Export  Shipments. 

What  are  the  chief  reasons  for  special  financing  of  export 
shipments  ? 

What  methods  of  financing  should  be  used — -direct  bank 
loans,  discount  of  foreign  drafts,  borrowing  on  open  ac- 
count, or  other  methods? 

How  do  these  methods  affect  a  firm 's  borrowing  power  with 
respect  to  line  of  credit  with  banks  f 

To  what  extent  do  special  agencies  assist  the  exporter  in  the 
financing  of  export  trade  ? 

How  does  the  Edge  Law  facilitate  the  financing  of  export 
business  1 

B.  Credit  Policy. 

Are  export  credits  necessarily  long-term  credits?  Under 
what  conditions  should  long-term  credits  be  granted? 

What  considerations  determine  the  use  of  terms  involving 
documents  against  payment? 

When  is  it  advisable  to  use  documents  against  acceptance 
terms  ? 

Under  what  conditions  is  it  necessary  or  advisable  to  grant 
requests  for  open  account  terms? 

C.  Credit  Management. 

What  are  the  sources  of  credit  information  ? 

Should  credit  information  upon  particular  concerns  be 
secured  only  when  orders  are  received  from  them  or  in 
advance,  either  upon  inquiry  or  upon  selection  of  the  par- 
ticular concern  as  a  prospective  buyer  ? 


EXPORT    FINANCING    AND    CREDITS  461 

What  information  is  of  greatest  value  in  the  determination 
of  credit  standing  of  a  foreign  buyer?  Which  sources  are 
most  reliable? 

What  methods  should  be  used  in  passing  upon  credit  appli- 
cations ? 

D.  Collections, 

What  instructions  should  be  given  to  banks  for  the  collec- 
tion of  drafts  ? 

Should  banks  be  instructed  to  protest  non-acceptance  of 
drafts? 

Should  they  be  instructed  to  protest  non-payment? 

Under  what  conditions  should  one  attempt  to  litigate  the 
collection  of  overdue  accounts? 

E.  Claims  and  Adjustments. 

What  steps  should  be  taken  in  case  goods  are  rejected 
before  acceptance? 

How  should  the  concern  act  with  respect  to  claims  for 
adjustment  (a)  because  of  shortage  and  (b)  because  of 
failure  of  quality  to  agree  with  samples? 

Under  what  conditions  should  foreign  buyers  be  allowed 
to  return  goods? 

What  instructions  should  be  given  to  banks  with  reference 
to  claims  for  adjustments?    With  reference  to  rejection? 

What  policy  should  be  adopted  with  reference  to  cancel- 
lations ? 


462     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  119 

Garfield  Talking  Machine  Company — Discounting 
Drafts  versus  Bank  Loans* 

The  Garfield  Talking  Machine  Company  is  frequently 
called  upon  to  extend  60  or  90  days'  credit  to  the  foreign 
merchants  who  have  purchased  records  and  machines. 
The  firm  is  in  a  strong  financial  position,  and  in  the  past 
has  been  able  to  take  care  of  this  burden  without  diffi- 
culty. Competition,  unfavorable  exchange  rates,  and 
backward  business  conditions  have  increased  the  demand 
for  longer  credit  terms.  This  tying  up  of  additional 
capital  is  handicapping  the  company  in  its  expansion. 
Since  it  is  evident,  however,  that  credit  terms  cannot  be 
reduced  if  sales  are  to  continue  to  increase,  the  firm 
is  undecided  whether  it  should  discount  the  acceptances 
of  its  customers  with  the  bank  or  whether  it  should  ob- 
tain additional  bank  loans. 

By  selling  the  acceptances**  of  its  customers  to  a  bank 
the  company  immediately  secures  the  use  of  the  money,  is 
relieved  of  all  difficulties  of  collection,  and  secures,  in 
effect,  the  advantages  of  a  C.  0.  D.  shipment,  since  in- 
terest charges  are  taken  into  consideration  in  quoting  the 
price  at  the  time  the  terms  are  agreed  upon.  In  this 
manner  the  foreign  business  of  the  company  is  called 
upon  to  finance  its  own  needs  instead  of  burdening  the 
entire  company  with  the  trouble  of  securing  additional 
loans. 

A  discounted  draft  is  a  contingent  liability  on  the  part 
of  the  company,  and,  in  case  the  customer  who  accepts 
a  draft  fails  to  meet  his  obligations  when  due,  the  Gar- 

*Whitaker,  Foreign  Exchange,  and  Escher,  Foreign  Exchange  Explained, 
furnish  excellent  descriptions  of  methods  of  financing  foreign  trade  and  of 
foreign  exchanges.  Cf.  also  Clare,  A.  B.  C.  of  Foreign  Exchange ;  Dewey 
and  Shugrue,  Banldng  and  Credit,  Chaps.  Ill  &  XXVII;  Patterson, 
Domestic  and  Foreign  Exchange;  Spalding,  Foreign  Exchange  and  For- 
eign Bills;  York,  Foreign  Exchange :  Theory  and  Practice;  Margraff,  Inter- 
national Exchange ;  Gonzales,  Modern  Foreign  Exchange ;  Goschen,  Theory 
of  the  Foreign  Exchanges ;  Agger,  Organized  Banking;  Brown,  Interna- 
tional Trade  and  Exchange ;  Moulton,  Financial  Organization  of  Society; 
and  Westerfield,  Banking  Principles  and  Practice: 


** 


See  Addenda  1  on  pages  534,  535,  536  and  537. 


EXPORT    FINANCING    AND    CREDITS  463 

field  Company  must  stand  ready  to  reimburse  the  bank 
for  money  it  has  advanced  on  this  draft.*  In  case  a  cus- 
tomer wishes  to  have  his  credit  terms  extended  for  any 
reason,  it  is  difficult  to  arrange  this  matter  after  the  ac- 
ceptance has  been  discounted  by  the  bank  and  possibly 
rediscounted  by  the  Federal  Reserve  Bank  or  some  other 
institution.  Furthermore,  in  case  a  customer  wishes  to 
anticipate  his  draft  and  sends  a  check  to  the  Garfield 
Company,  before  the  draft  is  presented  for  payment  com- 
plications are  liable  to  result. 

By  borrowing  from  a  bank  on  the  firm's  own  credit,  the 
company  avoids  many  of  these  difficulties  although  oc- 
casionally it  is  able  to  secure  a  lower  interest  rate  by  dis- 
counting acceptances.  This  method  is  open  to  the  ob- 
jection, however,  that  it  is  not  so  flexible  as  the  discount- 
ing of  drafts,  since  the  acceptances  are  discounted  as 
soon  as  they  come  in,  and  the  money  obtained  from  this 
source  fluctuates  with  the  need.  Although  the  company 
has  a  line  of  credit  of  about  $300,000  against  which  notes 
to  the  extent  of  $120,000  are  outstanding,  the  securing 
of  additional  bank  loans  reduces  the  amount  of  available 
credit  left  to  the  Garfield  Company,  whereas  discounting 
of  acceptances  does  not  interfere  \vith  the  amount  of 
available  loans  outstanding.  In  addition  to  its  regular 
line  of  credit,  the  Garfield  Company  has  been  granted  a 
line  of  acceptance  credit  by  its  bank  sufficient  to  meet 
ordinary  needs. 


"That  this  objection  is  not  unimportant  is  shown  by  the  failure  in  1921 
of  a  New  York  export  house  which  did  not  have  the  funds  to  reimburse  the 
bank  when  the  latter  came  to  it  for  recourse  on  discounted  drafts  of  its 
customers  which  had  been  dishonored.  Bank  acceptances  are  generally  not 
open  to  this  objection,  since  foreign  banks  are  usually  in  stronger  financial 
condition  and  are  directed  by  men  with  more  financial  training  than  are  in- 
dustrial companies.  In  parts  of  Central  America  and  Mexico,  however,  oc- 
casional difficulties  have  been  reported  arising  from  failure  of  banks  to 
meet  their  obligations. 


401     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  120 

The  Sanford  Motor  Car  Company — Methods  of 
Financing  Foreign  Shipments 

In  order  to  increase  its  sales  abroad  the  Sanford  Motor 
Car  Company  is  attempting  to  develop  a  method  of  fi- 
nancing foreign  shipments  which  will  make  payment  by 
the  dealers  as  easy  as  possible  but  at  the  same  time  will 
protect  the  company  against  loss  and  the  nndue  tying 
up  of  its  capital  in  long-time  credits.  The  Sanford  cars 
are  sold  f .o.b.  steamer  New  York  City,  so  that  all  foreign 
dealers,  no  matter  where  they  are  located,  can  secure 
them  at  the  same  price  plus  freight  and  insurance 
charges.  At  the  present  time  the  firm  is  selling  cars  in 
England,  France,  Italy,  and  the  Scandinavian  countries, 
in  the  largest  countries  of  Latin  America,  and  in  the 
Philippines,  Australia,  and  New  Zealand,  its  dealers 
varying  all  the  way  from  high-grade  merchants  of  es- 
tablished reputations  to  those  operating  practically  "on 
a  shoe  string."  The  heads  of  the  firm  are  firmly  con- 
vinced that  the  further  development  of  its  foreign  trade 
has  an  important  bearing  upon  the  company's  future, 
for  in  their  opinion  the  automotive  industry  in  the  United 
States  is  over-developed  almost  20%*.  Both  the  four 
and  six-cylinder  Sanford  models  are  in  the  medium- 
priced  group  of  pleasure  vehicles ;  but  unless  the  foreign 

*  Automotive  Industries,  Feb.  16,  1922,  p.  309.  The  best  available  statis- 
tics show  that  there  are  12,.'i88,949  cars  and  trucks  in  the  world.  This 
figure  has  l)cen  obtained  after  a  careful  and  comprehensive  investigation, 
including  every  country  and  covering  a  period  of  some  six  months. 

Outside  of  the  United  States  there  are  2,083,289  cars  and  trucks.  These 
are  distributed  through  every  country  and  every  continent  in  the  world, 
and  indicate  the  widespread  progress  of  automotive  development.  It  is 
true,  however,  that  a  large  percentage  of  these  vehicles  are  in  the  English- 
speaking  countries.  The  United  States,  Great  Britain,  and  Canada  have 
about  91  per  cent  of  the  automobiles  in  the  world,  while  Australia,  New- 
foundland, etc.,  add  to  the  predominance  of  the  English-speaking  nations 
from  an  autoniotive  viewpoint.  The  United  States  alone,  with  its  10,500,660 
registration  in  1921,  has  over  83  per  cent  of  the  world  total;  Canada  a 
little  over  3.5  per  cent,  and  Great  Britain  nearly  4  per  cent. 

Because  the  United  States  includes  so  large  a  percentage  of  total  auto- 
mobile registrations,  it  is  necessary  to  eliminate  its  total  from  most  dis- 
cussions of  world  statistics,  if  such  discussions  arc  to  serve  any  practical 
purpose.     The  United  States  is  in  a  class  by  itself  so   far  as  automotive 


EXPORT    FINANCING    AND    CREDITS  465 

field  can  be  induced  to  absorb  a  larger  portion  of  these 
than  heretofore,  the  prices  in  the  long  run  must  be 
advanced.  ^ 

A  method  of  handling  foreign  shipments,  which  was 
followed  by  many  companies  during  the  war,  is  to  de- 
mand cash  against  documents  in  New  York.  This  method 
gives  the  company  complete  protection,  but  mth  un- 
favorable exchange  rates  and  keen  competition,  it  drives 
away  business.  It  also  makes  an  unfair  discrimination 
in  favor  of  the  large  dealer  who  has  ample  resources 
and  who  can  borrow  advantageousl}^  from  his  bank. 
Frequently  a  bank  is  willing  to  lend  money  on  cars  al- 
ready in  the  dealer's  possession,  but  is  not  willing  to 
advance  a  loan  to  be  paid  down  in  a  distant  port.  Com- 
mission houses  may  be  induced  to  pay  cash  in  New  York 

selling  problems  are  concerned.  Consequently,  the  United  States  regis- 
tration figures  are  treated  as  a  separate  unit  in  another  article. 

Divided  into  major  continental  classifications,  the  world  registrations 
line   up    as    follows : 

North  and  South  America 11,162,110 

Europe    1,110,996 

Asia 134,730 

Oceania  125,281 

Africa    55,832 

From  the  point  of  view  of  the  American  exporter,  the  English-speaking 
countries  with  the  largest  registration  are  not  of  major  interest,  since  the 
foreign  market  for  his  product  lies  elsewhere  for  the  most  part. 

Excluding  the  motor  vehicles  in  the  United  States,  Great  Britain,  and 
Canada  the  total  for  the  remainder  of  the  world  amounts  to  about  1,122,259. 
An  arbitrary  division  of  these  remaining  registrations  may  be  made  for 
market  study  as  follows : 

Spanish-speaking    countries 241,584         21.6% 

Europe     (exclusive    of    Great    Britain,     Spain, 

Portugal,    Azores) 570,774  50.87t) 

Africa    (exclusive    of   Port.    East    Africa,    I\Ia- 

deira  Is.)    55,332  4.9% 

Oceania  (exclusive  of  Pliilippine  Islands) 112,900         10.1% 

Asia 134,730         12.0% 

North  and  South  America  (exclusive  of  Spanish- 
speaking  countries,   U.   S.   A.,   Canada) 6,939  .6% 

World   total    (exclusive    of   U.    S.    A.,    Canada, 

Great  Britain)    1,122,259 

A  detailed  analysis  of  registration  distribution  is  necessary,  ho^vever,  if 
maxinmm  value  is  to  be  derived  from  these  world  statistics.  The  value  of 
the  various  countries  as  export  markets  depends  partly  upon  the  regis- 
tration figures,  but  chiefly  upon  other  economic  factors  peculiar  to  the 
individual  territory. 


466    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

in  behalf  of  the  foreign  buyer ;  but  it  is  reported  that  al- 
though a  strong  dealer  may  secure  this  service  for  21/2%, 
for  a  weaker  merchant  a  fee  of  from  5%  to  10%  is  some- 
times charged. 

By  using  a  sight  draft,  documents  against  payment, 
the  company  overcomes  many  of  the  disadvantages  of 
requiring  cash  against  documents  in  New  York.  The 
selling  firm  prepares  all  the  necessary  papers,  makes 
out  a  draft  covering  the  full  amount  of  the  price  of  the 
machines,  the  insurance,  freight,  and  interest  covering 
the  period  which  must  elapse  between  the  sending  of 
the  draft  to  the  bank  in  the  customer's  city  and  the  re- 
ceipt of  the  money  in  New  York.  Thus  the  customer 
does  not  pay  for  his  machines  until  they  have  been  ship- 
ped and  the  papers  have  arrived  in  his  own  city.  In  a 
less  degree  this  method  has  some  of  the  disadvantages 
of  paying  cash  in  advance;  for  if  the  documents  and 
drafts  arrive  on  a  mail  steamer  ahead  of  the  arrival  of 
the  cars,  the  dealer  may  be  asked  to  pay  cash  a  month 
before  his  machines  arrive.  Furthermore,  under  this 
arrangement,  the  company  assumes  some  degree  of 
credit  risk;  for  if  the  dealer  refuses  to  accept  the  ship- 
ment, it  is  forced  to  pay  ocean  freight,  insurance,  and 
other  costs  of  sending  the  cars  to  the  customer,  all  carry- 
ing charges  in  the  port  of  destination,  and  the  cost  of 
returning  the  cars  to  New  York  or  diverting  them  to 
another  dealer..  The  danger  of  loss  from  this  source, 
however,  can  be  prevented  by  requiring  the  dealer  to 
make  a  deposit  covering  these  charges,  which  will  pro- 
tect the  company  in  case  payment  is  declined.  Since 
this  deposit  will  usually  run  from  10%  to  20%  of  the 
total  amount  due  and  there  is  but  little  chance  that  cars 
will  depreciate  this  amount  in  a  month's  time,  there  is 
an  inducement  for  the  dealer  to  accept  the  shipment. 

Many  of  the  comiDanj-'s  distributors,  however,  are 
small  dealers  who  are  unable  to  do  business  on  this 
basis,  and  even  those  who  could  handle  such  transactions 
frequently  prefer  to  have  longer  credit  terms.  These 
dealers  sometimes  ovm  cars  for  demonstration  purposes, 
but  all  orders  of  customers  must  be  filled  directly  by  the 


EXPORT    FINANCING    AND    CREDITS 


467 


company.  It  is  proposed  that  the  Sanford  Company 
draw  a  30,  60,  or  90-day  draft  on  the  dealer  and  ship  the 
cars  documents  against  payment.  Under  this  plan  a 
deposit  to  cover  freight  and  insurance  is  required  from 
the  dealer  as  before,  unless  the  draft  is  to  be  accepted 
by  a  bank.  The  cars  are  shipped  and  the  documents 
sent  to  the  dealer's  bank  which  presents  the  draft  to 
the  dealer  for  acceptance.  The  documents  of  course  are 
retained  by  the  bank  against  full  payment,  and  when 
the  cars  arrive  they  are  either  placed  in  storage  by  the 
bank  or,  as  is  more  frequently  the  case,  turned  over  to 
the  dealer  for  storage  on  a  trust  receipt.*  "When  the 
merchant  sells  a  car  he  receives  a  deposit  from  his  cus- 
tomer, goes  to  the  bank,  and  secures  the  release  of  one 
car  on  a  note  or  other  securitv.     The  dealer  then  col- 


in 

%  o 

i  W  -^ 

P-l   — H   ^ 

H 


,19. 


(City) 


(State) 


IDENTIFICATION  NO.: 

Always  quote  this  number 
when  reporting. 


EECEIVED    OF. 


,  Bank    of for 


SANFOKD  MOTOE  CAR  COMPANY 


Bill    of    lading,    Railroad. 

Motor  Vehicles. 

Make 


.Car    No.  .  .  .Initials. 


.for. 


(Type  or 

(Model     Nos.(...)    (...)    (...)    (...)    (...)    (...) 
(Serial   Nos.    (...)    (...)    (...)    (...)    (...)    (...) 

(Motor  Nos.  (...)  (...)  (...)  (...)  (...)  (...) 
I  (we)  hereby  acknowledge  that  said  Motor  Vehicles  are  the 
PROPERTY  OF  SAID  SANFORD  MOTOR  CAR  COMPANY 
and  agree  to  take  and  liold  the  same,  at  my  (our)  sole  risk  as 
to  all  loss  or  injury,  for  the  purpose  of  storing  said  property; 
and  I  (we)  hereby  agree  to  keep  said  Motor  Vehicles  new  and 
not  to  operate  them  for  demonstrating  or  otherwise ;  and  to  re- 
turn said  Motor  Vehicles  to  said  bank  or  to  said  SANFORD 
MOTOR  CAR  COMPANY  or  its  order  upon  demand;  and  to 
pay  and  discharge  all  taxes,  encumbrances,  and  claims,  rela- 
tive thereto.  I  (we)  hereby  agree  not  to  sell,  loan,  pledge, 
mortgage,  or  otherwise  dispose  of  any  of  said  Motor  Vehicles 
to  any  other  jierson  except  upon  written  order  from  the  SAN- 
FORD MOTOR  CAR  COMPANY  for  Release  from  Trust,  upon 
payment  to  bank  mentioned  therein  of  the  amount  required  by 
said  order,  and  upon  the  endorsement  on  the  back  of  this 
Trust  Receipt  by  said  bank  of  Release  from  Trust. 

Witness 

(Dealer) 

By 

(Official  Title) 


468     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

lects  his  pa^Tment  from  his  customer  and  reimburses  the 
bank.  Of  course,  whether  all  the  cars  are  sold  or  not, 
total  payment  must  be  made  when  the  draft  falls  due, 
although  a  reliable  dealer  is  often  able  to  arrange  ex- 
tensions through  his  local  bank.  All  carrying  charges, 
interest,  and  other  expenses  incurred  during  the  time 
that  the  cars  are  in  storage  are  paid  by  the  dealer. 

Reports  from  Buenos  Aires  and  other  South  American 
ports,  however,  indicate  that  warehouse  facilities  are 
taxed  to  the  utmost  and  American  goods  are  frequently 
left  standing  in  the  open.**  Banks  are  willing  to  extend 
loans  on  staple  articles,  but  in  many  countries  the  auto- 
mobile is  classed  as  a  luxury.  Even  in  the  United  States, 
the  foremost  automobile  country  of  the  world,  two 
Federal  Reserve  banks  have   classified  motor  cars   as 

*Footnote    continued    from    preceding    page: 

1.  I    (we)   have  read  the  Trust  Eeceipt  and  have  made   not  only  myself 

(ourselves)  entirely  familiar  with  its  requirements,  but  every- 
one who  will  handle  any  cars  for  me    (us). 

2.  It  is  thoroughly  understood  by  me    (us)   that  a  car  held  under   Trust 

Receipt  cannot  be  used  on  the  road  for  any  kind  of  demon- 
strating. 

3.  I   (we)   know  that  a  car  held  under  Trust  Receipt  cannot  be  used  for 

exhibition  purposes  or  stored  at  any  other  location  than  at  my 
place  of  business  (unless  permission  has  first  been  sought  and 
granted ) . 

4.  I    (we)    am    (are)    aware  that  a  car  held   under   Trust  Receipt   is  the 

property  of  the  SANFORD  MOTOR  CAR  COMPANY,  and  that 
before  any  disposition  whatsoever  can  be  made,  the  amount 
due  on  the  car  must  be  paid  FIRST  and  receijited  Order  for 
Release  secured. 

5.  It  is  understood  by  me   (us)  that  every  acceptance  or  note  is  required 

to  be  paid  when  due,  even  though  not  a  car  has  been  sold  before 
the   maturity   date. 

6.  I   (we)  have  no  objections  to  the  making  of  periodical  inventories  and 

the  inspecting  of  cars  by  your  representative. 

Name 

(If  not  a  corporation,  show  Trade  Style   (if  any)  as 
well  as  proprietor's  or  firm  name.) 

'By 

(Name  of  individual  signing) 

(Official  Title) 

**Advices  to  the  Washington  Bureau  report  that  fourteen  hundred 
American  and  European  automobiles  are  stored  outside  the  Buenos  Aires 
Custom  House,  with  no  protection  from  the  weather  except  the  original  cases 
in  which  they  were  packed. — The  South  American,  June  1921. 


EXPORT    FINANCING    AND    CREDITS  469 

luxuries.  With  unfavorable  excliange  rates  and  poor 
business  conditions  it  is  doubtful  if  many  banks  would 
be  willing  to  extend  credit  to  automobile  dealers  under 
these  arrangements.  In  some  countries,  as  in  Australia, 
the  legal  value  of  the  trust  receipt  is  questionable  unless 
it  is  registered.  Since  the  records  of  registration  are 
usually  published,  the  customer  believes  that  general 
distrust  and  reflection  on  his  credit  standing  and  ability 
are  broadcasted  by  such  a  step. 

This  plan  is  further  objected  to  on  the  ground  that  it 
is  not  satisfactory  for  the  large  dealer,  who  is  really  the 
company's  most  important  means  of  distribution.  A 
dealer  in  Australia  may  want  ten  cars  a  month  to  put 
in  his  show  rooms  or  possibly  use  for  demonstration 
purposes  as  soon  as  they  arrive.  If  this  man  paid  cash 
in  New  York  he  would  have  his  capital  tied  up  in  three 
shipments  at  one  time,  two  of  which  would  be  on  the 
water;  neither  can  he  afford  to  have  his  capital  tied  up 
by  payment  as  soon  as  the  cars  arrive.  It  is  proposad, 
therefore,  that  the  company,  having  assured  itself  of 
the  dealer's  financial  position  by  securing  a  statement 
of  his  last  year's  performance,  should  draw  a  90-day 
sight  draft  on  this  merchant  and  ship  the  cars  documents 
against  acceptance.  The  usual  deposit  would,  of  course, 
be  required  in  advance  in  order  to  cover  the  cost  of 
freight  and  insurance  charges  if  this  dealer  should  re- 
fuse to  accept  the  shipment. 

The  company  has  found  from  experience,  however, 
that  this  plan  has  not  always  worked  satisfactorily.  A 
balance  sheet  was  submitted  by  one  of  its  dealers  show- 
ing among  other  things  a  two  to  one  ratio  between  his 
current  assets  and  current  liabilities.  Several  shipments 
of  cars  were  made  and  the  drafts  were  met  promptly. 
Then  exchange  fell  so  that  his  automobiles  cost  him  al- 
most twice  as  much  as  before  and  being  unable  to  sell 
his  cars,  he  asked  for  60  days'  extension.  This  extension 
was  granted,  as  were  subsequent  requests  of  the  same 
nature.  Finally  the  company  asked  this  dealer  to  turn 
back  to  the  bank  the  shipment  of  six  cars  which  he  was 
unable  to  pa\^  for,  which  the  bank  would  hold  against 


t70     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

cash  payment  and  release  to  him  again  as  soon  as  pay- 
ment was  made.  The  dealer  had  claimed  that  he  could 
not  sell  these  cars,  yet  it  was  found  that  he  had  only 
four  in  his  possession,  tw^o  of  which  showed  signs  of 
extensive  use.  The  company  informed  him  that  the 
delivery  of  used  cars  was  unsatisfactory  and  demanded 
immediate  payment;  this  was  refused.  Seeing  but  little 
hope  of  securing  its  ends  through  litigation,  the  com- 
pany finally  sold  the  cars  at  a  sacrifice,  because  their 
sale  took  place  after  new  models  had  been  put  on  the 
market. 

What  methods  should  the  Sanford  Company  use  in 
assisting  its  foreign  dealers  to  finance  shipment? 


Problem  121 

The  Chapman  Company — Policy  Regarding  Extension 
OF  Credit* 

When  accounts  were  closed  on  December  31,  1920,  the 
Chapman  Company,  a  prominent  concern  manufacturing 
small  tools,  found  that  there  were  outstanding  over 
$500,000  in  the  foreign  field  upon  which  extensions  had 
been  granted  or  upon  which  pa^^ment  had  not  been  made 
at  maturity.  In  the  domestic  field  as  well,  business  con- 
ditions were  bad.     Consequently,  the  large  amount  of 

^General  phases  of  credit  policy  in  export  trade  are  treated  in  the  works 
upon  foreign  exchange  and  various  publications  of  banks  and  in  numerous 
articles  in  periodicals,  among  which  may  be  cited : 

PrinPers'  Ink. 

Sept.  19,  1918,  p.  33— "Eight  Granting  of  Foreign  Credits  as 
Sales  Builder." 

New  York  Evening  Post. 

Sept.  20,  1919— "Exports  and  Credits." 

Nov.      8,  1919— "Future   Export   Trade   Depends  on  Credits." 
Feb.    14,  1920 — "Japan    Is    Making    an     Attempt    to     Strengthen 
Credit  Position. " 

Export  Trade  4'  Exporters'  Review. 

Sept.  25,  1920,  p.  14 — "International  Credit  Machinery  and  a  Credit 
Policy. ' ' 

July  30,  1921,  p.  26— "Three  Types  of  Credit  Terms  for  the  Mexi- 
can importer." 


EXPORT    FINANCING    AND    CREDITS  471 

frozen  credits  in  proportion  to  the  total  assets  of  the 
business  brought  up  vividly  before  the  board  of  directors 
the  question  of  reconsideration  of  the  credit  policy. 

The  Chapman  Company  has  been  exporting  goods  for 
many  years.  An  export  office  is  maintained  in  New  York  in 
charge  of  an  export  manager.  During  December,  1920,  the 
few  orders  which  came  in  demanded  90  days '  to  180  days ' 
credit,  and  the  total  amount  of  foreign  sales  dropped  to 
less  than  10%  of  the  volume  in  December  1919.  The 
president  of  the  concern  is  inclined  to  change  the  com- 
pany's credit  policy  radically,  refusing  to  extend  60  and 
90-day  credits  as  in  the  past,  documents  against  accep- 
tance, but  instead  requiring  cash  in  advance  or  the  open- 
ing of  a  confirmed  letter  of  credit  before  goods  will  be 
manufactured  and  shipped.  At  the  meeting  in  January 
1922  it  was  decided  that  definite  adoption  of  a  new  policy 
should  be  postponed  to  await  developments  in  the  next 
few  months,  but  that  meanwhile  extreme  care  should 
be  taken  in  the  extension  of  foreign  credits  and  that, 
except  for  unusual  cases  of  old  customers  known  to  be 
in  solvent  condition,  no  credit  should  be  granted.  Several 
months  later  the  president  brought  forward  a  proposi- 
tion patterned  after  a  practice  adopted  by  a  company 
in  another  Hue  of  business.  This  company  decided,  when 
business  conditions  in  Europe  became  unsettled,  to  ask 
all  its  foreign  customers  to  send  confirmed  bankers' 
letters  of  credit,  against  which  the  manufacturer  could 
draw  upon  presentation  of  bill  of  lading,  insurance  cer- 
tificate, and  invoices  covering  the  shipments  forwarded. 

Proceedings  Conventions  National  Foreign  Trade  Conneil. 
1917,  p.  195,  group  session — "Foreign   Credits." 
1919,  p.  329,  E.  D.  Fisher— "  What  Part  Must  Credit   Play  in  the 
Expansion  of  Our  Foreign  Trade?" 

1919,  p.   337,    Frank   D.    Rofk— "Some   of   the    Peculiar    Difficulties 
and  Problems  in  Foreign  Credit  Granting." 

1920,  p.   451,   Henry   S.   McKee—" Foreign   Credits." 

Bureau  of  Foreign  &  Domestic  Commerce,  Special  Agents  Series  No 
90,  by  E.  N.  Hurley— "Banking  and  Credit  in  Argentina,  Brazil,' 
Chile  and  Peru. " 

Journal  of  the  American  Bankers'  Association. 

Jan.  1921,  p.  457 — "Financing  Foreign  Trade." 


472     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

A  further  proposition  is  that  the  cash  discount  should 
be  arranged  according  to  the  type  of  credit  furnished. 
For  instance,  if  credits  were  furnished  against  which 
the  manufacturer  might  draw  at  sight,  they  would  give 
the  maximum  cash  discount.  A  smaller  discount  would 
be  given  if  the  draft  were  made  out  at  30  days,  still 
smaller  for  60  days,  and  net  for  90  days.  Even  longer 
time  would  be  given  under  confirmed  credit,  provided 
interest  charges  were  paid. 

The  president  of  the  Chapman  Company  claims  that 
this  plan  is  entirely  suitable  and  that  the  export  man- 
ager should  be  able  to  secure  the  voluntary  agreement 
of  the  foreign  agents  to  such  an  arrangement.  He  states 
further  that,  if  the  agent  cannot  secure  credit  from  his 
bank,  he  is  not  the  sort  of  agent  to  whom  the  company 
can  afford  to  sell  on  open  credit  under  present  condi- 
tions. The  president  further  proposes  that  the  company 
pay  the  cost  of  the  letter  of  credit,  which  would  not  run 
over  1/2  of  1%  (usually  Vs  to  ^4  of  1%). 

Is  the  plan  a  feasible  one  f  Should  the  Chapman  Com- 
pany adopt  it  in  preference  to  continuation  of  its  old 
policy  of  granting  acceptance  credit,  assuming  that 
greater  care  is  exercised  in  future  transactions? 


EXPORT  FINANCING  AND  CREDITS  473 

Problem  122 

The  Lundstrom  Company — Extending  Credit  Terms 
Because  of  Competition* 

The  Lundstrom  Company,  manufacturing  a  special 
type  of  textile  machinery,  has  had  some  difficulty  in 
meeting  competition  in  the  foreign  field.  Many  of 
the  foreign  mills  are  not  in  a  strong  financial  posi- 
tion and  the  lower  prices  offered  by  English  and  Ger- 
man competitors  often  prove  attractive.  Although 
these  foreign  mill  owners  are  quick  to  recognize  the 
general  superiority  of  the  American  manufacturers' 
products,  they  have  not  large  amounts  of  money  avail- 
able for  expansion  or  replacement  at  the  present  time, 
and  therefore  frequently  place  their  orders  with  compet- 
ing manufacturers.  The  Lundstrom  Company's  foreign 
sales  volume  has  consequently  fallen  off  and  its  salesmen 
are  advocating  that  credit  terms  be  made  easier  in  the 
fields  where  competition  is  keen. 

The  Lundstrom  Company  manufactures  about  $4,000,- 
000  worth  of  special  textile  machinery  each  year,  a  sub- 
stantial portion  of  which  is  exported.  Li  the  foreign 
field  it  sells  its  machines  direct  through  its  o^vn  sales- 
men. Many  of  the  mills  in  Southern  Europe,  South 
America,  India,  China,  and  Japan  have  been  the  com- 
pany's customers  in  the  past.  Its  salesmen  are  technical 
experts  who    thoroughly    understand    the  problems  of' 

*For  the  general  question  of  long  credits,  cf.  Wolfe,  Theory  and  Practice 
of  International  Commerce,  Part  IV;  and  Withers,  International  Finance; 
also  the  following: 

New  York  Evening  Post. 

Mar.  5,  1921 — "Long  Term  Credit  Schemes  Proposed." 

Apr.    2,    1921 — "Europe's    Exporters    Grant    Long    Credits    While 

American   Firms   Are   Retrenching. ' ' 
Apr.  5,  1921 — "Long  Term  Credit  Schemes  Proposed." 

Proceedings  of  conventions  of  National  Foreign  Trade  Council. 

1921,  p.  21,  George  R.  Meyercord — "Value  of  Long  Credits  to  the 

Exporting  Manufacturer. ' ' 
1921,   p.   28,   J.   J.    Donovan — "The   Lumber    Exporter's    Need    for 

Long-credit  Machinery. ' ' 
1921,    p.    39,    Julius    H.    Barnes — "Long    Time    Credits    and    Their 

Value  to  the  Agricultural  Exporter. ' ' 


474    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

different  types  of  textile  mills,  and  who  have  their  head- 
quarters in  the  textile  centers  in  the  foreign  countries. 
When  they  visit  a  mill  they  find  out  the  amount  of  horse- 
power required  to  run  each  machine ;  the  details  of  spin- 
ning the  yarn  or  weaving  the  kind  of  cloth  made  in  that 
mill;  what  kind  of  work  machine  is  used,  its  type,  age, 
efficiency,  and  make,  and  the  wages  that  are  being  paid 
the  workers.  The  salesmen  then  try  to  show  the  mill 
owner  how  he  can  make  larger  profits  by  installing  the 
Lundstrom  special  machines  in  different  parts  of  the 
factory. 

If  a  sale  is  made,  the  credit  terms  are  arranged 
through  one  of  the  New  York  banks.  These  terms  are 
usually  based  on  credit  ratings.  If  the  foreign  mill  is 
small  and  not  well-known,  mth  an  uncertain  credit 
rating,  it  is  frequently  required  to  open  a  letter  of  credit 
in  a  New  York  bank  so  that  the  company  is  able  to  secure 
payment  as  soon  as  its  machines  are  shipped.  If  the 
credit  rating  of  the  firm  is  of  a  higher  grade,  it  may  be 
given  ninety  days '  credit.  A  few  of  the  larger  and  better 
known  firms  with  which  the  company  has  had  consider- 
able dealings  in  the  past  are  allowed  to  buy  machines 
and  other  equipment  on  open  account,  paying  the  bill 
at  their  convenience. 

If  the  company  grants  its  salesmen's  requests  for  leni- 
ent credit  terms  in  highly  competitive  foreign  fields  it 
will  undoubtedly  make  it  easier  for  the  salesmen  to  sell 
machines,  since  several  mill  owners  are  reported  as  say- 
ing that  if  longer  terms  could  be  granted  they  would  be 
favorably  inclined  toward  the  Lundstrom  Company's 
product.  There  is  but  little  doubt,  therefore,  that  if 
these  mills  were  allowed  to  pay  for  machines  in  small 
installments  over  a  period  of  one  or  two  years'  time  or 
to  postpone  the  whole  payment  for  six  months  or  a  year, 
larger  sales  would  result.  An  increased  volume  would 
be  of  considerable  help  to  The  Lundstrom  Company 
since  the  factory,  which  is  running  at  only  two-thirds 
capacity,  could  be  operated  more  efficiently. 

On  the  other  hand,  business  conditions  in  India,  South- 
ern Europe,  and  even  South  America  are  very  uncertain. 


EXPORT    FINANCING    AND    CREDITS  475 

A  mill  may  be  solvent  today  but  because  its  customers 
fail  to  pay  its  bills  when  due,  it  may  become  involved  in 
bankruptcy  within  a  comparatively  short  time.  If  such 
a  mill  is  not  in  a  position  to  pay  cash  for  new  machines 
or  to  buy  equipment  on  reasonable  short-credit  terms, 
it  may  be  even  more  difficult  for  it  to  pay  such  bills  in 
the  future.  The  Lundstrom  Company  has  a  large  sur- 
plus and  is  in  a  strong  financial  position,  but  the  exten- 
sion of  long-credit  terms  to  foreign  mills  would  require 
the  borrowing  of  additional  capital.  Although  the  com- 
pany could  probably  secure  loans  sufficient  to  finance 
two-thirds  of  its  foreign  business  with  extended  credit 
terms  of  a  year,  it  would  be  taking  an  additional  risk  in 
order  to  secure  the  business. 

Should    the    Lundstrom    Company    extend   its    credit 
terms  as  a  means  of  meeting  foreign  competition? 


Problem  123 

Washburn  Company — Curtailing  Credit  in  Time 
OF  Depression* 

In  selling  its  oil  surface  floor  covering  and  art  rugs 
the  Washburn  Company  has  adapted  its  terms  of  sale 
to  the  credit  ratings  of  its  foreign  customers  as  reported 
by  commercial  agencies.  Old  customers  of  good  finan- 
cial standing  mth  whom  relations  have  been  satisfac- 
tory in  the  past  have  been  allowed  90  days'  credit  if 
they  desire.  Newer  customers  and  those  mth  sHghtly 
less  favorable  rating,  have  been  allowed  30  days.  In 
eases  where  any  question  has  arisen  as  to  the  credit 
rating  or  financial  standing  of  a  customer,  cash  has  been 
required   against   documents;    and   in   a    few   instances 

*The  following  articles  -will  be  of  interest: 
Export  Trade  &  Exporters'  Eeview. 

Apr.  2,  1921,  p.  11 — "Keeping  Up  the  Foreign  Customer's  Morale." 
Proceedings   of  conventions  of   National   Foreign   Trade   Council. 

1921,  p.  15,  W.  P.  G.  Harding— "  Frozen  Credits— What  They  Are 
and  How  to  Thaw  Them. ' ' 


476    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

where  the  business  ethics  of  the  customer  was  ques- 
tioned, a  deposit  of  20%  has  been  required  in  advance. 

The  Washburn  Company  has  found  that  a  number  of 
customers,  even  with  a  high  credit  rating,  have  recently 
failed  to  meet  their  bills  promptly  because  of  unfavor- 
able rates  of  exchange  and  the  general  business  depres- 
sion prevailing  in  most  countries.  In  some  instances  the 
company  has  failed  to  collect  at  all.  For  example,  tw^o 
years  ago  six  carloads  of  floor  covering  were  shipped  to 
Australia.  The  papers  were  sold  to  the  bank  on  the  first 
four  carloads.  The  two  remaining  carloads  were  ready 
to  ship  when  the  company  received  a  cablegram  stating 
that  its  Australian  customer  w\as  unable  to  pay  for  the 
shipment.  The  Washburn  Company'  cancelled  the  order 
for  the  remaining  two  carloads  and  reimbursed  the  bank 
for  the  advance  that  it  had  made  on  the  first  part  of  the 
order.  A  similar  case  occurred  more  recently  in  Cuba, 
where  the  company  has  had  $10,000  worth  of  its  products 
in  storage  for  almost  a  year  because  a  customer  refused 
to  accept  the  goods  after  they  arrived.  Other  cases  have 
occurred  in  Central  and  South  America,  and  the  com- 
pany has  lost  so  much  money  on  this  account  that  the 
profit  on  its  foreign  business  has  been  completely  wiped 
out. 

The  credit  manager,  therefore,  has  adopted  the  policy 
of  refusing  to  0.  K.  any  foreign  orders  on  terms  other 
than  a  deposit  in  advance  in  cases  where  the  risk  is  great, 
and  cash  against  documents  in  all  other  instances.  The 
company's  foreign  business  has  already  been  cut  in  half 
and  this  policy  has  reduced  the  remaining  amount  of 
export  business  by  about  one-third,  but  the  firm  has  been 
making  a  profit  on  the  amount  of  foreign  business  which 
remains.  The  credit  manager  admits  that  this  step  is 
somewhat  drastic,  but  he  says  that  in  times  of  depres- 
sion it  is  only  natural  to  curtail  credit  in  order  to  prevent 
loss  to  the  company. 

The  sales  manager  and  his  entire  organization  natu- 
rally are  opposed  to  this  policy  and  have  appealed  to 
the  board  of  managers  to  have  this  rule  set  aside.  The 
sales  manager  admits  that  the  company  is  making  money 


EXPORT    FINANCING    AND    CREDITS  477 

on  the  small  amount  of  foreign  business  which  it  con- 
tinues to  carry  on,  but  he  saj^s  that  it  is  shortsighted  to 
follow  such  a  policy,  since  the  company  is  not  consider- 
ing the  future.  Customers,  whose  orders  have  been 
refused  because  of  disinclination  or  disability  to  pay 
cash  against  documents,  vdW  undoubtedly  purchase  of 
competitors  in  the  future.  This  man  states  that  since 
the  company  has  ample  capital  in  a  time  of  depression, 
it  should  follow  a  lenient  credit  policy  in  order  to  assist 
its  customers.  By  adopting  such  a  policy  the  company 
would  increase  the  number  of  its  customers,  and  as  busi- 
ness conditions  changed  for  the  better  their  orders  would 
increase  and  the  Washburn  Company  would  be  more 
than  repaid  for  any  losses  it  might  have  to  undergo  at 
the  present  time. 

Should  the  Washburn  Company  continue  its  present 
credit  policy! 


Problem  124 

Emekson  &  Company — Credit  Information* 

In  granting  credit  to  foreign  customers  the  Emerson 
Company  depends  upon  its  financial  dealings  wdth  the 
merchant  in  the  past,  reports  as  to  his  character  and 
business  abilit}^,  his  credit  rating  according  to  commer- 
cial agencies,  and  the  eagerness  of  the  company  to  do 
business  in  that  locality.  It  has  found,  however,  that 
it  is  not  enough  to  know  that  a  foreign  merchant  is  honest 

*The  sources  of  foreign  credit  information  may  be  summarized  briefly  as 
follows : 

(1)  Commercial  agencies,  such  as  E.  G.  Dun  &  Co.  and  the  Bradstreet  Co. 

(2)  National  Association  of  Manufacturers. 

(3)  Philadelphia  Commercial  Museum. 

(4)  Foreign   Credit   Interchange   Bureau    of   the   National    Association    of 

Credit   Men. 

(5)  Banks. 

(6)  Other  firms  with  which  the  concern  has  done  business  given  as  refer- 

ences by  the  applicant. 

(7)  Salesmen's    and    representatives'    reports. 

(8)  Foreign  mercantile  credit  agencies. 


478    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

and  has  met  his  bills  during  times  of  prosperity;  it  is 
necessary  that  the  company  also  know  something  of  his 
ability  and  judgment  in  order  to  forecast  how  he  will 
carry  on  his  business  under  adverse  conditions. 

Where  possible,  the  company  tries  to  secure  a  financial 
statement.  Although  during  the  war  many  of  the  for- 
eign houses  gave  financial  statements  in  order  to  secure 
the  filling  of  their  orders,  they  are  not  accustomed  to 
giving  confidential  facts  of  their  businesses.  They  are 
not  free  in  reporting  on  their  financial  conditions,  and 
frequently  a  foreign  house  feels  insulted  if  it  is  asked  to 
do  so.  There  is  also  some  question  as  to  the  worth  of 
such  a  statement,  since  an  item  such  as  Accounts  Receiv- 
able does  not  mean  much  unless  the  character  of  these 
accounts  is  thoroughly  understood. 

To  secure  information  on  its  foreign  credits  the  Emer- 
son Company  is  having  its  salesmen  send  in  reports  on 
the  credit  standing  which  its  foreign  customers  have 
among  other  merchants  in  their  own  community. .  It  is 
also  trying  to  secure  information  from  the  same  source 
as  to  a  merchant's  ability  and  judgment.  The  reports 
that  it  receives  from  commercial  agencies  frequently  in- 
clude copies  of  letters  from  banks  and  commercial 
houses,  with  which  the  merchants  have  had  dealings,  as 
to  their  promptness  in  paying  and  the  credit  limits  that 

Cf.  also  Wyman,  Export  Merchandising,  and   the  following: 
The  World's  Markets. 

May  1919,  p.  31 — "Foreign  Credits  and  Credit  Information." 
New  York  Evening  Post. 

Aug.  16,  1919 — "Credit  Inform;ition  More  Important  Than  Loans." 
R.  G.  Dun  4-  Co.,  i,9i 9— "Foreign  Credit  Information." 
Export  Trade  &  Exporters'  Review. 

Apr.   29,   1922,   p.   10 — "Sources   of    Information   on    Foreiffn    Credit 
Risks." 

Proceedings  of  conventions  of  National  Foreign  Trade  Council. 

1919,  p.  351,   H.   F.  Beebe— "In  What  Form   and   Manner   Can  Ex- 
porters   Cooperate    for    Foreign    Credit    Information?" 
1919,  p.  358,  E.  E.  Pratt— "What  Assistance  May  the  Government 
Give  Exporters  in  Selecting  Safe  Foreign  Credit  Eisks?" 

National   City  Bank,  N.   Y.   C— "A   Creditor   Country,"   by  George  E. 
Roberts. 


EXPORT    FINANCING    AND    CREDITS  479 

other  companies  have  allowed  them.  Much  of  this  infor- 
mation is  scattered  and  occasionally  an  important  item 
is  overlooked.  It  is  proposed  therefore  that  all  this  infor- 
mation should  be  consolidated  on  the  following  form  for 
the  ready  use  of  the  credit  manager. 

CREDIT  REPORT 

Name Place _ 

Character  of   business ..Rating- 

New  or  old Present  C/L....How  old  and  how  paid 

Incorporated  in Capital Amount    issued 

Commenced    business Ages  of  members _ - 

Character  and  habits Ability.- Attend  to  business... 

Assets  Llvbilities 

Quick  assets Accounts  payable 

Not    due $ 

Raw  and  finished  stock $ Accounts  payable 

Past  due $ 

Accounts  receivable    (good) Notes  payable 

Notes    receivable 

Cash _ 

Fixed  assets Mortgages  on  real  estate 

Real  estate  and  machinery 


Insurance    carried Annual     sales.. 

How  are  bills  paid 


Remarks 

Should  the  Emerson  Company  insist  upon  securing 
the  confidential  information  required  on  this  credit  re- 
port? 


480    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  125 

The  Jorgensen  Shoe  Company — Granting  Credit  Based  on 
Capability  of  Foreign  Dealers  and  Conditions  Abroad 

In  granting  credit  the  Jorgensen  Shoe  Company  has 
always  stressed  the  character  and  capabiUty  of  the  deal- 
er and  his  credit  needs,  in  addition  to  considering  other 
factors,  such  as  the  man's  capital  and  the  conditions 
under  which  his  business  is  being  operated.  Instead  of 
regarding  the  credit  department  as  a  brake  on  the  sales 
organization,  as  is  frequently  the  case,  the  Jorgensen 
Company  is  inclined  to  treat  it  more  as  a  steering  wheel 
guiding  the  sales  organization  in  the  selection  of  dealers 
who  mil  be  most  profitable  to  the  company.  Even  under 
adverse  rates  of  exchange  and  poor  business  conditions, 
the  credit  department  has  not  lost  sight  of  the  future 
development  of  the  export  trade  of  the  company  and 
often  has  authorized  the  extension  of  credit  under  ex- 
treme conditions. 

The  company  made  a  shipment,  sight  draft,  documents 
against  payment  to  a  merchant  in  southern  Italy.  Shortly 
before  the  shipment  arrived,  an  earthquake  followed  by  a 
fire  caused  heavy  damage  in  his  city  and  destroyed  his 
business.  This  dealer  possessed  a  high  degree  of  capa- 
bility, although  his  c^apital  and  credit  standing  were  im- 
paired. The  company  cabled  the  dealer  asking  him  if  he 
had  been  injured  in  the  catastrophe ;  finding  that  he  had 
not,  it  cabled  the  bank  to  release  the  shipment  on  open 
account  providing  the  merchant  cared  to  take  it.  That 
the  credit  department's  judgment  was  justified  in  ex- 
tending credit  solely  on  the  dealer's  capability  is  shown 
by  the  fact  that  the  business  of  this  merchant  has  so  in- 
creased that  now  the  company  frequently  ships  from 
$3,500  to  $6,000  worth  of  shoes  to  him  on  a  single  order. 

In  India  it  was  extremely  difficult  for  an  American 
shoe  manufacturer  to  secure  a  distributor  because  the 
English  manufacturers  monopolized  the  market.  A 
small  order  was  received  by  the  Jorgensen  Company 
from  a  native  dealer  who  according  to  English  credit 


EXPORT    FINANCING    AND    CREDITS  481 

reports  was  not  a  sound  credit  risk.  Since  this  man 
possessed  fair  capability  and  his  heed  for  credit  was 
great,  the  company  arranged  to  ship  him  an  order  ex- 
tending credit  for  90  days.  This  man  has  developed  his 
business  and  is  now  established  on  a  firm  credit  founda- 
tion largely  because  of  the  assistance  rendered  by  the 
American  firm. 

The  Jorgensen  company  never  deserted  Mexico  in 
spite  of  the  frequent  revolutions,  but  continued  to  ship 
orders  on  credit  terms  as  it  hacl  done  previously.  The 
sales  and  credit  needs  of  every  Mexican  state  and  dealer 
were  carefully  studied.  When  a  customer's  business  was 
destroyed  through  bandit  operations,  the  company  as- 
sisted him  in  rebuilding  his  business.  From  1910  to  1916 
the  comjDany  lost  less  than  $600,  and  there  is  still  a  chance 
that  a  part  of  this  may  be  recovered. 

Likewise,  when  the  moratorium  was  declared  in  Cuba, 
instead  of  deserting  this  field  the  credit  department  at 
once  wrote  to  all  its  credit  customers  in  Cuba  that  the 
company  believed  in  them  and  the  financial  soundness  of 
their  country's  policies,  and  that  orders  would  be  taken 
on  open  account.  The  credit  department  thoroughly 
realized  that  it  could  not  enforce  payment  even  when  the 
moratorium  was  over;  but  relying  upon  the  capabilities 
and  honesty  of  its  dealers  in  this  territory,  the  firm  was 
prepared  to  continue  to  do  business  rather  than  abandon 
the  field  to  European  competitors. 

In  order  to  secure  information  on  the  capabilities  of 
dealers  and  supplement  the  reports  of  commercial  agen- 
cies, the  company  originally  had  its  agents  report  by  let- 
ter on  the  ability,  character,  and  credit  rating  of  each 
customer.  Most  of  these  letters,  however,  were  vague 
and  dealt  only  in  generalities,  as  sho^\^l  by  the  follo^\ing 
typical  example : 

The  firm  of  &  has  been  established 

for  a  number  of  years  in  the  city  of  Other 

merchants  in  the  community  say  that  the  Com- 
pany pay  their  bills  promptly  and  that  the  firm  enjoys 
a  high  reputation. 


482     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Since  such  information  is  practically  valueless,  the 
company  is  considering  adopting  the  following  form  for 
salesmen's  reports  in  order  to  secure  specific  facts 
regarding  each  customer. 

CONFIDENTIAL  CREDIT  INFORMATION 

NAME   OF   FIRM 

ADDRESS - -.- 

CABLE  ADDRESS _..._ 

NAMES  OF  PARTNERS...... _ _ 


STATE  WHETHER  FIRM  IS  REGISTERED  AND  WHERE 


WHEN  ESTABLISHED 

PRESENT  STATE  OF  BUSINESS. 
NAME  OF  MANAGER 


NATURE  OF  BUSINESS. 


STOCK 

APPROXIMATE  AMOUNT  OF  SALE S. 


BUSINESS  METHODS 

HOW  DO  THEY  MEET  OBLIGATIONS?.. 

CREDIT _ 

SELLING    ABILITY _ 

FROM  WHOM  THEY  BUY _ 


BANKERS 

PROPERTY    OWNED.! 


INSURANCE 

RUNNING    EXPENSES 

APPROXIMATE    CAPITAL. 
RATING  OF  FIRM 


SOURCE   OF  INFORMATION.. 


REPRESENTATIVE 
DATE_.._ _ „ _ „ 


EXPORT    FINANCING    AND    CREDITS  483 

However,  this  form  lias  met  with  disapproval  for  not 
furnishing  sufficient  information  as  to  the  dealer's  char- 
acter and  capability.  In  fact,  the  ability  of  salesmen  to 
report  reliable  credit  data  in  any  event  has  been  seriously 
questioned.  Even  if  reliable  data  is  secured,  there  are 
many  objections  to  granting  credit  on  the  basis  of  a  man's 
character  and  capability,  because  no  matter  how  capable 
a  man  may  be,  he  is  frequently  not  able  to  overcome  the 
circumstances  and  conditions  under  w^hich  he  is  obliged 
to  carry  on  his  business.  If  the  exchange  rate  suddenly 
falls  or  business  conditions  are  unfavorable,  the  mer- 
chant may  not  be  in  a  position  to  pay  his  bills  and  the 
Jorgensen  Company  may  suffer  a  heavy  loss  regardless 
of  the  fact  that  this  man  may  possess  a  large  amount  of 
native  ability  and  shrewdness  and  have  a  reputation  for 
high  character.  Since  local  conditions  are  held  by  many 
to  be  the  really  important  basis  on  which  credit  should 
be  granted,  it  is  recommended  that  the  company's  agents 
should  make  a  report  every  two  months  giving  complete 
information  on  the  follo"\\dng  points  on  which  it  should 
be  more  fully  informed: 

REPORTS  ON  CONDITIONS 

Bi-MoNTHLY  Reports:  Once  eveiy  two  months  we  wish  a  re- 
port on  the  business  conditions  which  prevail  in  the  agent's 
territory.  This  report  should  be  quite  brief  but  submitted  un- 
der the  following  captions : 

Questions  to  Be  Answered  by  Each  Agent  Periodically 

1.  Tlie   present   state  of   business   in   the*  shoe   trade, 

both  wholesale  and  retaU. 

2.  The  financial  situation  with  particular  reference  to 

rate  of  exchange,  crop   outlook,  recent  haiwests, 
prices  of  principal  products,  etc. 

3.  The  effect  of  the  prevailing  rate  of  exchange   on 

importations,    the    outlook    for    change    and    the 
prospect  for  the  future. 

4.  The  possibilities  of  selling  American  shoes  in  the 

next  few  months  and  the  outlook  for  the  near 
future. 


484    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

5.  The  competition  of  European  countries,  especially 
England,  France,  Germany,  Italy,  Spain,  and 
Japan. 

General  Letter:    We  should  also  like  to  have  the  agent  write 
us  at  the  same  time  regarding  the  following  details : 

A.  If  receiving  regularly  our  bulletins,  price-lists,  etc. 

B.  If  fullj^  supplied  with  samples  or  if  needing  any  addi- 

tional ones  to  replace  or  complete  his  line. 

C.  Any  helpful  suggestions  for  increasing  his  business. 

Should  any  changes  be  made  in  these  reports? 

Which  report  would  it  be  advisable  for  the  company  to 
adopt  1 


Problem  126 

Savoy  Shoe  Company — Methods  of  Securing  and 
Analyzing  Credit  Information* 

The  Savoy  Shoe  Company  has  suffered  large  losses 
in  the  foreign  field  because  of  bad  accounts.  The  com- 
pany sells  men's  medium-price  shoes  directly  to  retail 


^Various   phases   of  credit   management   are   discussed   in   the   following 
articles : 

The  World's  Markets. 
Nov.  1920,  p.  41— ( 

Dec.   1920,  p.  26 — ("Practical  Exporting."      (Shall  export  manager 
Jan.  1921,  p.  28— (  pass  on  credits?) 

Printers'  Ink. 

Nov.  4,  1920,  p.  61 — "Many  Ways  of  Determining  Foreign  Credit 

Risks. ' ' 
Jan.  13,  1921,  p.  73— "The  'Three  C's'  of  Export  Credit  Granting." 


EXPORT    FINANCING    AND    CREDITS  485 

dealers  in  the  principal  countries  of  Europe,  Latin 
America,  and  in  the  Philippine  Islands.*  Credit  re- 
ports of  several  commercial  agencies  have  been  utilized, 
but  as  one  of  the  vice-presidents  expresses  it,  ''Since  the 
war  the  world  is  in  too  great  a  state  of  flux  for  us  to  rely 
on  the  old  methods  of  securing  credit  information.  The 
foreign  dealer  who  is  considered  a  good  risk  one  month 
may  be  a  poor  one  the  next.  As  far  as  we  can  determine, 
because  of  the  high  unit  cost  of  their  product,  the  auto- 
mobile companies  have  made  the  farthest  advance  in 
securing  up-to-date  and  reUable  credit  information.  The 
Jefferson  Automobile  Company  has  been  kind  enough 
to  let  us  make  a  study  of  its  methods  of  securing,  analyz- 
ing, and  acting  on  credit  information,  but  the  point  we 
want  to  know  is  'What  parts  of  the  Jefferson  credit 
policy  and  methods  are  adaptable  to  the  Savoy  Shoe 
Company's  business,  selling  shoes  worth  from  $7  to  $12 
a  pair  at  retail  and  handling  foreign  orders  runniiis-  from 
$300  to  $8,000'?" 

When  the  Jefferson  Automobile  Company  receives  an 
application  for  credit  from  a  new  customer,  it  not  only 
follows  the  usual  credit  practices  of  investigating  the 
three  C's — character,  capability,  and  capital — but  it  also 
lays  much  stress  on  general  conditions.  Perhaps  a  revo- 
lution may  be  pending  in  Guatemala,  or  poor  crops  are 
expected  in  Poland,  or  the  financial  situation  in  Finland 
is  not  satisfactory.  In  order  to  secure  definite  informa- 
tion on  each  distributor's  business,  each  dealer  is  re- 
quired to  furnish  a  recent,  signed  and  audited  balance 

*Iu  1922  the  foreign  sales  of  the  Savoy  Shoe  Company  were  $1, -495, 469, 
distributed  among  the  following  countries : 

Belgium   $     8,025 

Denmark    41,904 

France    22,473 

Italy  26,041 

Norway    28,794 

United  Kingdom 30,225 

Panama    26,020 

Mexico    228,391 

Cuba 980,481 

Argentina     28,061 

Chile 12,106 

Peru    39,285 

Philippine  Islands   23,060 


486    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

sheet  on  a  standard  form  prepared  by  the  company.  Al- 
though many  distributors  object  to  this  requirement,  they 
are  usually  willing  to  comply  with  the  request  when  the 
salesman  convinces  them  that  the  information  will  be 
kept  confidential  and  that  no  credit  terms  will  be  granted 
either  by  the  company  or  the  banks  unless  this  report  is 


Sutement  ot».~ 
Business .. 


Bbow  Trade  St>1«  (if  Any)  m»  vtil  U  crophetor't.  or  &nB  f 

„-_.Completc  Address. _ -. 


PLEASE  DATE  HERE 


I  (or  we)  make  the  following  statement  of  all  my  (or  o 


,  I9.„ 


i  and  liabilities  as  at  the  close  of  business  on. 

Based  on  actual  inventory  made. „_ _^...,  19 ™-. 

•nd  give  other  material  information  for  the  purpose  of  obtaining  advances  on  notes  and  (or)  acceptances  bearing  my  (or  our)  signature  or  endorse- 
ment,  and  for  obtaining  credit  generally  on  present  and  future  applications. 

(PLEASE  ANSWER  ALL  QtTESTIONS  AND  FILL  IN  ALL  BLANKS) 


Cash  on  Hand  and  in  Banks 

Accounts  Receivable  (Not  Due)  

Accounts  Receivable  (Past  Due — Collectible) 

Notes  Receivable  (Not  Due) 

Notes  Receivable  (Past  Due— CoUcctiblr) 

New  Automobiles  at  Cost  (See  Remark  No.  2) 

Freight  on  above  cars  (if  carried  on    your   books 


let)... 


Second-hand  Cars  and  Cars  for  own  use. 

Demonstrating  Cars. 

Automobile  Parts 

Automobile  Sundries  and  Accessories,. 

Oil  and  Gasoline  (for  sale) _ 

Other  Merrhandise  (What  kind?) 

Deposits  with  Manufacturers  or  Distributors... 
Other  Qiiick  Assets— What? 


TotaJ  Quick  Assets 

L*nd  and  Buildings 

Machinery,    Tools,    Shop    Equipment,    Pumiture 

and  Fixtures- -.  

Other  Assets  (Describe)      


Amounts, 
Not  Estimates 


LLABILITIES 


Owing  for  Automobiles  (See  Remark 

Owing  for  Parts 

C>wing  for  Tractors. 

Owing  for  Other  MeTchandise.— — 

Borrowed  from  Banks: 

On  Unendorsed,  Unsecured  Notes.. 

Oi  Notes  Endorsed  by: 

On  secured  notes. 
What  secunty? 


Borrowed  from  Others 

Prom  Whom? 
Sub-Dealer  Defiosita 
Reserve  for  taxes,  etc  _ 
Other  Curreait  I  labdities 

What? 


Total  Current  LlabIUtie&  _ 

Mortgages  on  Real  Estate.—. 
When  Due? 
Chattel  Mortgai,es 

When  Due?        , 

Reserves  other  than  those  above — for  what?,.. 


/Opilal    $ 
NET    WORTH  Vsurplufl  S. 


Give  Exact 

Amounts, 
Not  Estimates 


TOTAL  ASSETS 


TOTAL  (should  equal   Total  Ass'.'ts) -_. 


With  what  banks  do  you  deal? 


How  much  will  first  bank  lend  you  ufisecured? 

With  security — of  endorsement  or  collateral? 

How  much  will  second  bank  lend  you  unsecured?.., 
Withsecurity — of  endorsement  or  collateral?     


Sales  Past  Twelve  Months 


Parts  and  Other  Merchandise 
Repairs 

TOTAL  SALES    

Total  Operating  Expenses 

Net  Profit<;      


Signed  thif day  of_ 


,  19 Name- 


REMARKS 
3  required  at  top  of  page. 


By- 


<r  Trad*  Style  (if  any)  w  «d]  m  prepnctor*^  w  ftim  o 


(NuDo  of  Individual  ncoing) 


(Official  titla) 


been  odvoncrd  on  warehouse  receipts  or  cooditiona]  tales 
How  many  of  the  used  automobiles 


If  ony  of  the  new  automobiles  listed  under  "Assets"  ore  held  in  trust,  or  money  h« 
contracts,  or  otherwise,  the  amount  owing  must  be  listed  under  "  Liabilitirs." 

How  many  new  automobiles  on  hand? How  many  used  automobiles  on  hand? 

ore  on  hand  more  than  six  months? Could  they  be  sold  for  cash  at  the  price  listed? 

Do  Proprietors.  Officers  or  Partners  (1)  draw  stated  salaries  at  definite  times,  or  (2)  draw  at  pleasure? _ 

Ha*^e  you  ever  made  any  general  or  special  assignment  to  your  bank,  or  others,  of  your  accounts  or  notes  receivable  or  given  any  chattel 

mortfjagc  ot  other  hen  on  any  of  your  assets  to  secure  any  creditors? »_ __ 

If  so.  ore  any  in  force  at  the  present  time  and  to  what  extent? „ -__ 

(Fill  In  other  dde  also) 


FORM   14.    Savoy  Shoe  Company — Credit   Report  Form 


EXPORT    FINANCING    AND    CREDITS 


487 


furnished.  In  addition  to  the  balance  sheet  the  com- 
pany's form,  which  appears  below  (Eeverse  side  of  this 
form  is  shown  below)  requires  that  a  number  of  questions 
regarding  the  dealer's  business  be  answered. 

Stress  is  laid  on  the  importance  of  the  distributor's 
giving  bank  references  and  the  names  of  business  houses 
Mdth  which  he  has  dealt  in  the  past.    A  complete  investi- 


Important    Information 


The  information  requested  below  ia  mst  as  vitally  essential  as  the  data  on  the  revere  side.    They  are  factors  which  must  be  taken  into  c 
llderation  in  determining  the  amount  of  credit  which  may  be  extended. 
Please  answer  all  questions  and  611  is  all  blanks. 


Agency  for  what  products?  - 


Principal  industries  in  your  territory: 
A^cultural? What  crops  or  products? 


Mining? What  kind? 

Manofactoring? What  lands? 


Other  industries?    

la  your  business  a  sole  proprietorship?  ,.  Partnership?      Corporation? 

If  incorporated,  in  what  state?  When?  

Aothorized  Capital  $ Capital  Subscribed  $ 

Capita]  Paid  m  Cash  $. Capital  Paid  Otherwise  $ 

HowPaid? 

How  many  years  in  automobile  business? If  this  is  a  new  ve 

tore,  in  what  business  were  you  previously  engaged  and  in  wtjat  capacity? 


At  date  of  statement,  how  much  i 

carrying  on  automobiles? j 

On  other  merchandise? ] 

On  buildings  and  machinery? i 

Have  you  endorsed  for,  or  guaranteed  the  obligations  of 
any  other  person  or  concern? 


With  what  &nancing  companies  do  you  deal? 


How  much  win  each  company  carry  of  your  notes? 

much  now  being  carried  by  each? 


IF  PARTNERSHIP  OR  CORPORATION,  FILL  IN  BELOW 

Names  of  Officers  and  Directors  for  Partners)  (with  stockholding  or  partnership 


PtJLL  NAMB 


Interest  in  the 


REAL  ESTATE 
(Deamptioo  or  Location) 

COST 

Added  (at  cost) 

Present  Market 
Value 

Mortga^ 

1 

] 

3 

In  the  pot: 

r  dlstrflniton  ot  aotomobflaa  tins,  oUs,  etc..  from  whom  you  ore  bnrin«  oi 

have  bought 

ADDRESS 

CHECK  WHICH 

At  Present 

Formerly 

. 

Gin  flsm*  ftud  ftddrvM  ol  yaetwy  olMitttbutor  frqa  wboai  you  now  iuliJw  cii>t 


FORM  15.  Savoy  Shoe  Company — Credit  Report  Form — Reverse 


488     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

gatioii  of  each  reference  is  made,  the  credit  department 
writing  letters  to  each  firm  asking  the  terms  granted,  the 
complete  history  of  the  business  of  the  distributor  as  far 
as  is  kno^vn,  the  character  of  the  business  and  the  capa- 
bility and  character  of  the  directors  or  management.  In 
addition,  reports  are  secured  from  Dun's,  Bradstreet's, 
and  the  Foreign  Credit  Interchange  Bureau. 

The  current  items  of  the  balance  sheet  are  then  trans- 
ferred to  the  following  form,  where  the  assets  are  scaled 
down  and  a  credit  limit  established: 

CREDIT  LIMIT  ANALYSIS  STATEMENT 

Date 


Name 

Address. 


Scaled  Quick  Assets 

Current   Liabilities 

Net  Scaled  Quick  Assets- 


Ratio - 

Credit    Base 

Retail  Limit Wholesale  Limit.. 


SCALED  STATEMENT 
Quick  Assets 

Cash 

Accts.   Rcvble    (not   due) 

Accts.  Rcvble  (Past  due) 

Notes  Rcvble    (not  due) 

Notes  Rcvble   (Past  due) 

New   Autos    (cost) ., 

Used   Autos 

Auto  Parts 

Sundries  and  Access 

Oil  and  Gasoline 

Deposit  with  Mfrs 


EXPORT    FINANCING    AND    CREDITS  489 

Current  Liabilities 

Owing   for   Autos 

Owing    for    Parts 

Owing    other   Mdse 

Borrowed  from  Banks 

Borrowed  from   Others 


REMARKS : 


Scailed  by Approved   by. 


In  scaling  down  these  assets  the  company  must  take 
into  consideration  the  dealer's  location  and  the  condi- 
tions affecting  his  business.  The  following  percentages 
of  reductions,  however,  are  more  or  less  typical  of  the 
methods  used  in  scaling  down  the  assets  of  foreign  dis- 
tributors: 

Item  Percentage  of  Reduction 

Accounts     Receivable 20%  to  25% 

Under  doubtful  conditions  this  per- 
centage is  increased  as  high  as  35%. 

Notes    Receivable 20%  to  25% 

During  a  business  depression  this 
item  is  frequently  depreciated  30% 
to  35%. 

New   Automobiles 10% 

This  depreciation  is  made  to  cover 
price  changes  and  changes  in  business 
conditions.  In  case  a  drastic  price  cut 
has  been  made,  a  correspondingly 
larger  percentage  of  depreciation  is 
made. 


490    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 
Used     Automobiles 50%  to  60% 

Usually  a  second-hand  car  cannot  be 
sold  under  stress  anywhere  near  the 
price  at  which  it  is  valued  by  the 
dealer  in  making  his  financial  state- 
ment. 

Automobile   Parts 40% 

Most  dealers  carry  a  fairly  large 
stock  of  automobile  parts  in  order  to 
keep  the  cars  of  their  customers  in 
operating  condition.  Nevertheless,  be- 
cause of  -new  models  being  brought 
out  these  parts  depreciate  rapidly 
in  value  and  the  demand  for  them  is 
uncertain. 

Automobile   Accessories 50% 

Accessories  are  usually  regarded  as 
' '  frills ' '  and  therefore,  cannot  be  sold 
at  their  original  value  or  returned  to 
the  company  at  their  full  value  in 
case  of  financial  stress. 

Oil   and   Gasoline 40% 

Although  oil  and  gasoline  are  staple 
supplies,  they  are  subject  to  fire  loss, 
leakage,  and  other  losses  which  re- 
duce their  value  as  an  asset. 

General    Merchandise 40%  to  60% 

The  automobile  frequently  is  re- 
garded as  a  luxury  abroad  and  is  sold 
nowhere  in  such  numbers  as  in  the 
United  States.  Many  of  the  dealers, 
therefore,  frequently  carry  saddles, 
harnesses,  leather  goods,  and  other 
general  merchandise  in  order  to  cater 
to  the  large  portion  of  trade  which 
still  uses  horses,  pack  mules,  and 
other  draft  animals. 


EXPORT    FINANCING    AND    CREDITS  491 

Slow   Assets 

The  stock  of  other  companies  and 
other  slow-moving  assets  are  not 
easily  investigated  and  the  percent- 
age of  depreciation  depends  entirely 
on  the  companies  whose  stock  is  held. 

Current  liabilities  include  at  least  10%  contingent  lia- 
bilities, and  mortgages  and  similar  long-time  liabilities 
are  considered  current  if  they  come  due  mthin  the  year. 
Merchandise  is  listed  as  an  asset,  but  a  dealer  may  be 
so  overstocked  that  in  reality  this  item  is  more  of  a  drag 
than  a  help.  Although  loans  from  a  bank  give  a  good 
index  of  the  company's  credit  standing,  it  is  necessary"  to 
know  whether  or  not  they  are  secured.  In  Mexico,  for 
example,  it  is  reported  that  a  company  must  pledge  its 
accounts  receivable  in  excess  of  40%  of  the  loan.  Great 
care  is  also  taken  to  investigate  each  item,  since  round 
figures  usually  indicate  that  a  dealer  is  making  estimates 
rather  than  keeping  an  accurate  set  of  books.  "When 
the  total  scaled  current  assets  and  current  liabilities 
have  been  determined,  a  ratio  of  2  to  1  or  1%  to  1  of 
scaled  quick  assets  to  current  liabilities  is  required  and 
the  credit  limit  is  established  accordingly.  If  the  bal- 
ance sheet  is  not  good  enough  to  warrant  the  extension 
of  credit,  frequently  these  facilities  can  be  extended  by 
securing  additional  backing  from  directors  or  other  mem- 
bers of  the  firm. 

A  guarantee  fund  of  from  10%  to  20%?  of  the  total 
value  of  the  shipment  is  required  in  order  to  insure  the 
company  against  loss  from  the  payment  of  insurance 
and  freight  in  case  the  shipment  is  refused.  Usually  a 
permanent  arrangement  is  entered  into,  where  the  fund 
is  deposited  A\dth  the  company  as  long  as  it  continues 
to  finance  shipments  for  the  distributor.  Interest  is 
paid  of  course  on  this  fund,  which  is  returnable  on  re- 
quest if  the  accomits  of  the  distributor  are  clear.  This 
guarantee  fund  may  be  made  in  the  form  of  cash  in  New 
York,  or  a  confirmed  irrevocable  letter  of  credit  from  a 
bank  of  proper  standing  which  mil  be  available  against 
''clean  drafts"  in  lieu  of  a  cash  deposit. 


492     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

It  is  also  necessary  to  find  out  what  credit  terms  are 
being  granted  by  the  distributor  to  subsidiary  dealer 
organizations.  If  the  customers  of  a  large  distributor 
demand  credit,  it  is  frequently  necessary  in  order  to 
handle  this  business  that  he  be  granted  longer  credit 
terms  than  ordinarily.  Even  after  the  credit  limit  has 
been  established,  care  is  taken  to  keep  the  information 
up  to  date  in  order  to  keep  abreast  of  changing  conditions 
and  avoid  loss.  During  periods  of  fluctuation  in  foreign 
exchange,  applications  for  extended  credit  must  be 
watched  in  order  to  be  sure  that  they  are  not  made  for 
purposes  of  gambling  in  foreign  exchange.  A  customer 
accepts  the  draft  expecting  that  exchange  will  appreciate 
before  the  due  date.  In  case  the  rate  of  exchange  goes 
the  other  way,  he  may  be  in  worse  shape  to  pay  the  draft 
than  he  would  have  been  had  he  paid  it  at  sight.*  To 
take  care  of  this  difficulty  German  firms  sometimes  fol- 
low the  practice  of  making  credit  reserves  to  meet  long- 
time credit  risks,  but  the  Jefferson  Automobile  Company 
has  not  deemed  it  advisable  to  make  an  added  charge  to 
all  distributors  in  order  to  build  up  such  a  reserve. 


Problem  127 
Whitmore  Rubber  Company — Foreign  Credit  Association 

Many  American  manufacturers  have  been  experiencing 
not  a  little  trouble  and  annoyance  from  foreign  credits. 
Because  of  the  rates  of  exchange  these  foreign  houses 
are  forced  to  pay  high  prices  for  American  goods  at  a 
time  when  their  capital  is  tied  up  because  of  the  general 
business  depression.  Some  of  the  firms  are  finding  it 
difficult  to  meet  their  obligations ;  consequently,  the  com- 

*In  January  1921,  the  Jefferson  Antoniobilo  Company  shipped  twelve 
cars  to  a  dealer  in  Ilelsingfors,  Finland,  on  90  day  terms,  documents  against 
acceptance.  At  the  maturity  of  the  drafts,  an  extension  was  requested 
because  the  cars  had  not  been  sold  and  the  distributor  desired  an  oppor- 
tunity to  sell  before  meeting  the  obligation.  As  the  exchange  rates  dropped 
lower  and  lower  it  was  increasingly  difficult  for  the  dealer  to  meet  his 
obligations,  additional  extensions  were  requested,  and  the  company  was 
finally  forced  to  settle  at  a  loss. 


EXPORT    FINANCING    AND    CREDITS  493 

panies,  which  appeared  to  have  a  satisfactory  credit 
rating  in  the  credit  reports  of  commercial  agencies  and 
which  have  always  paid  their  bills  promptly  in  the  past, 
are  now  failing  to  meet  their  obligations  when  they  are 
due. 

The  experience  of  the  Whitmore  Rubber  Company  has 
been  no  exception  to  this  rule.  This  firm  manufactures 
rubbers,  overshoes,  and  sneakers,  a  large  number  of 
which  are  exported  to  South  America,  Mexico,  West 
Indies,  Australia,  New  Zealand,  and  the  Far  East.  It 
has  been  granting  credit  to  customers  based  upon  its 
experience  with  them  in  the  past  and  upon  the  reports 
of  commercial  agencies.  These  reports  are  based  to  a 
considerable  extent  on  correspondence,  the  age  of  the 
company,  an  estimate  of  the  capital  employed  in  its 
financial  statement  for  the  past  year,  information  as  to 
the  character  and  financial  standing  of  members  of 
the  firm,  and  information  as  to  the  promptness  with 
which  it  paj^s  its  bills  through  the  banks.  Fre- 
quently the  commercial  agency's  representative  in  a 
foreign  city  is  a  bank  or  lawyer  in  good  standing.  The 
reports  have  generally  been  reliable  in  the  past  and  cost 
about  $1.50  if  secured  under  contract  and  from  $2.50  to 
$5.00  without  a  contract,  depending  upon  the  country. 
Reputable  houses  which  have  always  paid  their  bills  in 
the  past,  frequently  claiming  their  discounts,  are  now 
not  paying  their  bills  prompth'  nor  are  they  always 
meeting  them  when  due.  These  firms  are  not  insolvent 
but  they  lack  ready  capital  with  which  to  pay  for  their 
goods.  The  company  is  therefore  anxious  to  secure  addi- 
tional credit  information,  where  possible,  and  to  this 
end  has  asked  its  salesmen  to  turn  in  reports  on  a  num- 
ber of  customers. 

Recently  the  credit  manager  of  the  Whitmore  Com- 
pany was  approached  with  the  proposal  to  join  the  Mu- 
tual Foreign  Credit  Interchange  Bureau  established  by 
the  National  Association  of  Credit  Men.  This  bureau 
has  been  organized  by  almost  two  hundred  American 
manufacturers   to   secure   additional   information   upon 


494    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  credit  rating  of  foreign  cnstomers.  A  charge  of 
$75  a  year  is  made  for  membersliip,  which  entitles  the 
firm  to  one  hundred  free  reports.  Additional  reports  may 
be  secured  at  the  rate  of  75c  each.  Each  member  is 
required  to  file  at  the  headquarters  of  the  bureau  a  com- 
plete list  of  his  foreign  customers,  with  information  as 
to  the  past  credit  relations  with  each  customer.  This 
information  is  kept  up  to  date  by  interchange  reports 
from  the  different  manufacturers,  containing  the  follow- 
ing items : 

How  long  sold.  Number  of  days  past  due. 

Terms  of  sale.  Manner  of  payment. 

Highest  recent  credit.  Credit  limit. 

Date  of  last  dealings.  Credit  declined. 

Amount  now  owing.  Comments. 
Amount  past  due. 

Supplementary  reports  contain  the  following  items  of 
information : 

Capital. 

Volume  of  business. 

Number  of  employees. 

Relative  size  of  house. 

General  reputation. 

Class  of  goods  handled. 

Languages  of  correspondence. 

Character  of  business  organization. 

Names,  ages  and  nationalities  of  partners,  etc. 

If  a  member  of  the  credit  bureau  should  desire  a  report 
on  Balmaceda  &  Company,  Rosario,  he  would  send  his 
request  to  the  bureau's  headquarters  where  reports  of 
several  thousand  firms  are  on  file.  If  a  report  of  this 
firm  is  on  hand,  when  the  request  is  received,  a  copy  is 
sent  to  the  inquiring  subscriber  by  return  mail.  If 
nothing  is  available  from  the  files,  the  firm's  card  is 
looked  up  and  an  inquiry  sent  to  each  subscriber  whose 
number  appears  thereon,  indicating  that  he  has  had 
experience  with  the  particular  firm  under  investigation. 
"When  these  subscribers  rejjly,  their  answers  are  incor- 


EXPORT    FINANCING    AND    CREDITS  495 

porated  in  the  form  of  a  preliminary  report  and  sent  to 
the  inquirer  from  five  to  seven  days  after  the  inquiry 
is  made.  With  the  preliminary  report,  if  available, 
there  is  sent  the  supplementary  information  regarding 
capital,  reputation,  etc.,  of  the  firm.  At  the  end  of  two 
weeks,  information  received  during  the  interim  is  incor- 
porated in  a  completed  report  and  sent  to  the  inquiring 
subscriber.  In  response  to  information  furnished  by  a 
member  on  any  account,  there  is  automatically  returned 
to  that  member  a  complete  gratuitous  copy  of  the  entire 
report. 

The  chief  objection  of  the  managers  of  the  Whitmore 
Company  to  joining  this  bureau  is  the  requirement  to 
furnish  a  complete  list  of  its  customers  to  the  bureau. 
Competition  in  the  rubber  business  has  been  keen  and 
the  managers  of  the  company  are  afraid  that  rivals 
might  secure  a  list  of  their  customers  and  seriously  hand- 
icap their  future  sales  in  the  foreign  field.  They  are 
also  dubious  as  to  the  amount  of  time  required  to  make 
reports  to  the  bureau  for  the  benefit  of  other  customers, 
since  they  have  done  business  with  over  7,000  foreign 
houses,  and  might  give  more  assistance  to  the  bureau 
than  they  would  receive.  Furthermore,  the  credit  bureau 
has  not  been  established  so  long  as  the  commercial  agen- 
cies and  it  has  not  so  many  sources  from  which  to  secure 
information. 

Would  it  be  advisable  for  the  Whitmore  Rubber  Com- 
pany to  join  the  Mutual  Foreign  Credit  Interchange 
Bureau?* 


*See  Addenda  2  on  pages  538,  539,  540  and  541. 


496    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  128 
Pike  Company — Credit  Insurance* 

The  Pike  Company,  like  many  other  American  manu- 
facturers, has  been  experiencing  considerable  difficulty 
in  securing  prompt  payment  of  its  foreign  bills.  This 
firm  manufactures  filing  cases  and  indexes  for  office 
use,  a  substantial  number  of  which  are  exported  to  the 
West  Indies,  South  America,  Mexico,  Australia,  New 
Zealand,  and,  to  a  limited  extent,  to  the  Far  East.  In 
handling  this  foreign  business  the  company  deals  direct 
through  its  own  salesmen,  all  orders  being  filled  from 
the  factory  in  the  United  States.  The  terms  are  usually 
60-day  or  90-day  sight  drafts,  unless  a  customer's  credit 
report  is  unsatisfactory,  in  which  case  cash  is  required 
against  documents  in  New  York. 

Although  the  credit  reports  of  the  customers  who  are 
given  60-  or  90-day  terms  are  satisfactory  and  they  accept 
their  drafts,  not  a  few  fail  to  make  payment  when  these 
drafts  fall  due.  These  customers  do  not  go  into  bank- 
ruptcy, assign  accounts,  or  go  out  of  business.  The 
rates  of  exchange  are  against  them ;  therefore,  they  must 
pay  high  prices  for  American  goods.  Business  condi- 
tions in  their  countries  are  unfavorable.  As  a  result 
these  customers  have  a  smaller  volume  of  trade  than 
usual,  and  being  short  of  funds  they  fail  to  make  pay- 
ment when  due.  It  is  possible  that  the  majority  of  these 
firms  may  make  some  adjustment  or  arrangement  for 
payment  at  some  future  date,  but  undoubtedly  the  com- 
pany will  be  forced  to  write  off  at  least  5%  or  6%  of  its 
present  foreign  accounts  as  bad  debts. 

*The  subject  of  credit  insurance  lias  been  discussed  at  the  annual  con- 
ventions of  the  National  Foreign  Trade  Council,  as  follows: 

1918,  p.  435,  George   E.    Meyercord — "A    Credit    Insurance   Plan   for 
Smaller  Manufacturers. ' ' 

1920,  p.  469,  George  U.   Meyercord — ' '  Foreign  Credit  Insurance. ' ' 

1921,  p.     80,  F.   D.  Rock— "The  Foreign  Credit  Department,   Its  Or- 
ganization, E(iuipment  and  Attitude. ' ' 

1922,  p.  ."142,  L.  R.  Browne — "Guide  Posts  in  Foreign  Credit  Granting," 


EXPORT    FINANCING    AND    CREDITS  497 

To  forestall  a  recurrence  of  this  difficulty  the  credit 
manager  is  considering  taking  out  credit  insurance  on 
foreign  accounts  with  tho  American  General  Credit  Insur- 
ance Company.  This  insurance  company  has  made  up  lists 
by  countries  of  the  credit  ratings  of  foreign  buyers  and 
merchants  on  whom  its  insurance  rates  are  based.  Oppo- 
site the  name  of  each  concern  is  set  the  amount  of  credit 
which  can  be  insured,  varying  from  $500  to  $10,000,  and 
the  premium  rate  for  90  days,  which  varies  from  1%  to 
21/2%  by  1/4  points.  A  foreign  house  may  be  rated  as 
follows : 

Leon  Gonzales,  Valparaiso,  Chile — Credit  Limit  $1,500 
— ^Rate  1%%.  This  means  that  the  insurance  company 
will  insure  the  payment  of  any  bill  of  goods  sold  to  Leon 
Gonzales  up  to  $1,500,  at  a  rate  of  1%%  for  90  days, 
against  insolvency  within  that  time  limit.  In  case  an 
extension  of  terms  is  agreed  upon,  the  insurance  can 
be  extended  for  another  90  days  at  the  same  rate. 

Should  the  Pike  Compam^  take  out  credit  insurance 
on  its  foreign  accounts? 


Problem  129 

New  England  Hardware  Company — Granting  of  Credit  on 
Open  Account  Terms 

In  September  1915,  the  firm  of  Romanos  &  Garcia, 
Bogota,  Colombia,  applied  to  the  New  England  Hard- 
ware Company  of  Boston  for  a  line  of  credit.  The  New 
England  Hardware  Company  had  no  agent  in  Colombia 
and  had  no  means  of  checking  up  the  South  American 
firm  except  through  the  credit  files  of  the  bank  which 
handles  its  export  business. 

In  its  letter  of  application  the  South  American  firm 
stated  that  it  conducted  a  wholesale  hardware  business. 
The  management  thought  a  business  of  $10,000  to  $15,000 
a  year  with  the  New  England  Hardware  Company  could 
be  effected  during  the  first  year  or  two,  with  the  prob- 


498    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ability  of  more  business  at  a  later  date.  The  firm  had 
never  imported  from  the  United  States,  bnt  had  had  rela- 
tions with  English  and  German  manufacturers ;  in  1915, 
however,  because  of  the  war  it  was  forced  to  turn  to 
American  hardware  manufacturers. 

The  New  York  bank  was  able  to  furnish  the  statement 
of  a  commercial  credit  agency,  as  well  as  the  report  of 
one  of  its  own  correspondents,  concerning  this  firm.  The 
following  is  an  extract  from  the  commercial  agency  re- 
port dated  June  1914. 

"This  firm  was  established  in  1908,  and  is  composed  of 
Pedro  Romanos  and  Ricardo  Garcia,  both  natives  of  Spain; 
aged  33  and  36.     Initial  capital  was  very  small. 

"The  formal  partnership  contract  was  dated  February  25, 
1909,  and  extended  four  years,  with  the  stipulated  capital  of 
$15,000   (gold),  equally  contributed  by  the  partners. 

"They  are  at  present  operating  under  a  newly  registered 
partnership  contract  dated  April  2,  1913,  to  run  for  a  term 
of  four  years,  with  a  declared  capital  of  $100,000,  equally  con- 
tributed by  the  partners.  Profits  are  to  be  divided  equally ; 
all  partners  are  active  and  responsible,  and  have  the  use  of 
the  firm's  signature.  At  this  date  the  partner  Garcia  was  in- 
terviewed, who  confirmed  the  above  details  of  contract  of  April 
2,  1913,  and  said  that  between  installations,  merchandise,  etc., 
there  is  an  investment  of  $150,000  (gold).  Fire  insurance  for 
$100,000  is  carried ;  while  he  added  that  accounts  receivable 
amount  to  some  $3,000  and  that  there  is  no  indebtedness  of 
any  kind.  The  monthly  movement  of  stock  is  $18,000.  Apart 
from  the  business  investment,  none  of  the  partners  make  claims 
of  outside  means. 

"From  investigations  made  locally  it  is  learned  that  this 
firm  is  favorably  regarded ;  their  business  methods  are  satisfac- 
tory, and  it  is  generally  believed  that  they  are  operating  with 
good  results.  Their  claim  as  to  business  investment  is  believed 
to  be  more  or  less  correct. 

"Personally  the  partners  have  always  enjoj^ed  excellent  repu- 
tation and  are  considered  industrious  men  of  good  morals  and 
intentions,  who  have  always  given  close  attention  to  their  affairs, 
and  through  economical  administration  and  efficiency  have  suc- 
ceeded in  making  progress  the  last  few  years. 

"Nothing  of  a  detrimental  nature  is  heard  against  their  com- 
mercial transactions.  They  have  the  name  of  complying  cor- 
rectly and  punctually  with  their  obligations,  and  their  present 


EXPORT    FINANCING    AND    CREDITS  499 

liabilities  are  not  believed  to  be  of  importance.  They  generally 
are  reported  to  discount  their  purchases  at  30  days,  without 
any  amount  of  complaints  up  to  the  present  writing,  and  in 
view  of  the  foregoing  the  signature  can  be  classed  as  an  ac- 
ceptable connection  for  their  ordinary  business  accommodation." 

Below  is  the  bank's  report  from  its  correspondent  on 
this  firm: 

•'Partnership  deed  dated  April  2,  1913.   Valid  for  four  years. 
Active  partners — Pedro  Komanos  and  Ricardo  Garcia. 
Capital — $100,000  (gold) — invested  by  the  partners  in  equal 
shares. "  . 

Agency  reports: 

''Firm  established  in  1908.     Two  branch  offices  in  Bogota. 

They  seem  to  trade  with  a  capital  of  $50,000   (gold),  and 

the  stock  of  goods  thev  possess  is  valued   at   $78,000  to 
$80,000   (gold)" 

Trade  reports : 

No.  1 — "Thev  have  been  clients. of  ours  for  the  last  ten  years. 

Credit— $6,000  to  $8,000  (gold) 

Former  clerks  of  Lopez  &  Company'.    They  are  well 
regarded  on  the  market. 
"No.  2 — Credit — $5,000  (gold)  which  thev  discount  punctu- 
ally. 
"No.  3 — Morally  they  are  very  good. 

Capital — unknown. 
Analysis  of  Balance  Sheet — June  8,  1914. 

Assets 

Cash  on  hand  and  in  banks $     4,909.77    (gold) 

Accounts  Receivable  of  Customers 20,317.71 

(Finished 
Merchandise   (Unfinished 112,003.41 

(Raw  

$137,230.89 

Furniture  and  Fixtures 12,209.15 

Partners'  Special  Account   6,284.49 


Total— gold   pesos $155,724.53 


500    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Liabilities 

Notes  payable  for  merchandise $  16,000.00 

Accounts   payable 28,152.91 

$  44,152.91 
Bills  due 1,120.00 

Total    liabilities $  45,272.91 

Partners'  Special  Account $  10,451.62 

Capital  100,000.00 

Total— gold  pesos $155,724.53 

The  South  American  firm  requested  credit  terms  of 
90  days  and  expressed  a  desire  that  they  be  granted  open 
book  credit. 

How  much  credit  should  the  New  England  Hardware 
Company  extend  to  this  firm  in  view  of  the  statements 
which  they  received?  What  terms  should  they  use  in 
carrying  on  business  with  the  firm? 


Problem  130 
Arabian  Steel  Company — Cancellation  of  Letter  of  Credit* 

On  August  5,  1918,  the  Lamond  National  Bank  of  New 
York  received  a  cablegram  from  its  branch  in  Buenos 
Aires,  dated  August  4,  asking  for  quotations  on  10,000 
cases  of  tin  plate  I.  C.  Prime,  20"x28",  112  sheets  per 
case,  weighing  214  lbs.  net,  the  inquiry  having  been  made 
by  the  firm  of  Blanco  &  Fernandez. 

At  that  time  tin  plates  were  being  conserved  in  the 
United  States  because  of  war  demands,  but  after  address- 
ing inquiries  to  various  steel  companies  the  New  York 
bank  received  a  quotation  dated  September  3  from  the 
Arabian  Steel  Company  of  New  York  City,  of  $26.00 
per  box  of  214  lbs.,  f.  o.  b.  New  York,  with  delivery  of 
90  days. 

*See  Addenda  3  on  pages  542,  543,  544  and  645. 


EXPORT    FINANCING    AND    CREDITS  501 

On  September  6  the  bank  cabled  the  following  to  the 
branch : 

"TIN  PLATE  HAVE  OFFER  TWENTY  FIVE  DOL- 
LARS EIGHTY  CENTS  FOB  NEW  YORK  PER 
BOX  TWO  HUNDRED  FOURTEEN  POUNDS  DE- 
LIVERY ABOUT  NINETY  DAYS  SUBJECT  EX- 
PORT LICENSE  UNDER  NEW  GOVERNMENT 
RULING  BLANCO  AND  FERNANDEZ  SHOULD 
ORDER  DIRECT  FROM  ARABIAN  STEEL  COM- 
PANY NEW  YORK." 

On  September  20  the  branch  cabled  to  the  home  office : 

"REFERRING  TO  YOUR  TELEGRAM  BLANCO 
AND  FERNANDEZ  CABLING  ORDER  DIRECT 
TO  THE  ARABIAN  STEEL  FIVE  THOUSAND 
CASES  TIN  PLATE  FORMAL  DECLARATION 
FOLLOWING  BY  MAIL  GUARANTEE  CABLE  BY 
UNITED  STATES  CONSUL  CREDIT  ACCORD- 
INGLY INSURANCE  COVERED  HERE." 

On  September  23  the  bank  quoted  this  cablegram  to 
the  Arabian  Steel  Company  and  asked  when  shipment 
might  be  made.  They  replied  by  requesting  more  infor- 
mation as  to  the  ultimate  use  of  this  tin  plate,  since  this 
information  was  required  by  Government  regulations 
then  in  force.  Since  the  information  desired  was  con- 
tained in  the  consular  certificates  received  from  the 
branch  as  suggested  in  their  cable  of  September  20, 
these  were  forwarded  to  the  Arabian  Steel  Company  on 
November  1.  Attention  was  called  to  the  notation  that 
marine  and  war  risk  insurance  were  to  be  covered  by 
the  consignee  and  that  it  would  be  necessary  therefore 
to  cable  the  consignee  when  the  goods  were  shipped. 

On  November  5  the  branch  confirmed  a  cablegram  of 
that  date,  in  which  they  requested  the  head  office  to 
notify  the  Arabian  Steel  Company  that  credit  had  been 
opened  in  their  favor  to  cover  the  order  of  tin  plate  in 
accordance  with  the  Branch's  cable  of  September  20. 
The  last  paragraph  of  the  letter  of  November  6  to  the 
head  office  read : 

"Kindly  note  this  credit,  which  is  numbered  942,  is  valid 
until  December  31  next,  so  that  shipment  will  have  to  be  ef- 
fected before  that  date." 


502     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

On  December  10, 1918,  the  branch  cabled : 

"CANrp:L  CREDIT  ARABIAN  STEEL  COMPANY 
CUSTOMER  CONSIDERS  ORDER  VOID  BE- 
CAUSE OF  DELIVERY  PERIOD  YOUR  TELE- 
GRAM OF  SEPTEMBER  SIX  NOT  COMPLIED 
WITH  NOTIFY." 

The  New  York  bank  consulted  with  the  Arabian  Steel 
Company  and  at  their  request  sent  tlie  following  cable- 
gram to  the  branch  on  December  13 : 

"ARABIAN  COMPANY  STATES  STEAMER 
SPACE  SECURED  FOR  EARLY  NEXT  WEEK 
MONEY  LOSS  LARGE  CAN  YOU  ARRANGE  RE- 
INSTATEMENT CLAIM  DELIVERY  AS  OR- 
DERED RI^SH  REPLY" 

On  December  16  the  branch  cabled  the  following  reply : 

"TIN  PLATES  WERE  TO  FILL  PRESERVE 
BOXES  CONTRACTS  HAVE  BEEN  CANCELLED 
WITH  CUSTOMER  THEY  HAVE  NO  RECOURSE 
ON  ACCOUNT  OF  LONG  DELAY  AFFIDAVIT  OF 
RESTRICTION  DOES  NOT  ALLOW  PLACING 
BUSINESS  ELSEWHERE  SHOULD  HAVE 
SHIPPED  WITHIN  NINETY  DAYS  OFFER  CAN- 
NOT BE  REINSTATED  MANY  SIMILAR  CASES 
OCCURRING  ON  ACCOUNT  OF  ALMOST  COM- 
PLETE CESSATION  STEEL  SHIPPING  FACILI- 
TIES DURING  LAST  MONTH  THE  IMPORTERS 
VERY  MUCH  PREJUDICED" 

On  December  24,  at  the  request  of  the  Arabian  Steel 
Comjjany,  the  bank  cabled  the  branch  as  follows : 

"ARABIAN  COMPANY  IN  ABSENCE  OF  CREDIT 
ASK  NEGOTIATION  DOCUMENTARY  DRAFT 
BLANCO  AND  FERNANDEZ  COVERING  SHIP- 
MENT IS  RISK  GOOD" 

To  this  the  branch  cabled  a  reply  on  January  2  read- 
ing : 

"TIN  plate'  quoted  NOW  EIGHTEEN  DOL- 
LARS DELIVERED  WAREHOUSE  ADVISE 
ARABIAN  NOT  TO  SHIP  UNLESS  SOLD  ON 
SOUND  BASIS" 


EXPORT    FINANCING    AND    CREDITS  503 

Meanwhile,  however,  the  Arabian  Company  had  re- 
ceived a  cable  from  Blanco  &  Fernandez  dated  December 
21,  1918,  which  read  as  follows : 

"IMPOSSIBLE  TO  OPEN  CREDIT  WILL  AC- 
CEPT TIN  PLATE  AGAINST  BILL  OF  LADING 
HERE  IF  LOADED  DATE  AGREED  UPON." 

On  the  strength  of  the  last-mentioned  cablegram  the 
Arabian  Steel  Company  made  shipment  on  January  9, 
and  delivered  to  the  bank  ocean  bills  of  lading  dated  De- 
cember 30,  1918,  for  shipment  on  the  "S.  S.  Carolina" 
of  3,050  boxes  of  tin  plate  in  two  lots.  Marine  and  war 
risk  insurance  were  taken  out  by  the  shippers  with 
an  American  company,  presumably  because  credit  had 
been  cancelled.  Another  bank  negotiated  the  draft  cov- 
ering the  remainder  of  the  shipment  of  1,950  boxes.  On 
December  31  the  Arabian  Steel  Company  had  cabled 
Blanco  &  Fernandez  that  the  tin  plate  was  shipped,  and 
on  January  8  received  this  cable  from  that  firm: 

"TIN  PLATE  NOT  HAVING  BEEN  SHIPPED 
WITHIN  TIME  STIPULATED  WILL  NOT  BE 
ACCEPTED  BY  US" 

On  January  10  the  Arabian  Company  replied  direct : 

"TIN  PLATE  SHIPPED  AS  PER  OUR  CABLE  DE- 
CEMBER THIRTY  FIRST  AND  DRAFTS  DRAWN 
AS  PER  YOUR  CABLE  AUTHORITY  DECEMBER 
TWENTY  EXPECT  YOU  THEREFORE  TO  PAY 
ON  PRESENTATION  OR  WE  HOLD  YOU  RE- 
SPONSIBLE" 

On  the  15th  Blanco  &  Fernandez  replied: 

"WE  AUTHORIZE  YOU  TO  DRAW  FOR  SHIP- 
MENTS MADE  WITHIN  DATES  OF  CONTRACT 
FOR  LATER  SHIPMENTS  WE  WILL  NOT  AC- 
CEPT" 

On  February  1  the  New  l^ork  bank  cabled  the  branch 
as  follows : 

"OUR  COLLECTION  NO.  5918  BLANCO  &  FER- 
NANDEZ SEVENTY  NINE  THOUSAND  FOUR 
HUNDRED  TWELVE  DOLLARS  MAILED  JANU- 


504    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ARY  TEN  ACCEPT  PAYMENT  LESS  FIVE  THOU- 
SAND SEVENTY  FIVE  DOLLARS  ALLOWANCE 
ON  FREIGHT" 

On  February  24  a  branch  cable  contained  the  following 
sentence : 

"COLLECTION  BLANCO  AND  FERNANDEZ  RE- 
FUSED ACCOUNT  NON  COMPLIANCE  CONDI- 
TIONS OF  DELIVERY" 

Is  the  contention  of  the  consignees  as  outlined  in 
branch  cablegram  of  December  10  just  and  correct? 

Was  the  Arabian  Steel  Company  justified  in  making 
shipment  to  Blanco  &  Fernandez  when  it  did  I  What 
action  should  have  been  taken  by  the  management  when 
notified  of  refusal  of  acceptance? 


Problem  131 

Harris  Hardware  Company — Determining  Whether  or  Not 
Credit  Should  be  Granted  to  Foreign  Customers 

The  Harris  Hardware  Company  is  attempting  not  only 
to  hold  its  present  customers  in  Latin  America,  but  also 
to  double  its  last  year's  sales  of  $123,000  in  that  field. 
Since  the  firm  sells  mainly  to  wholesalers  and  large  re- 
tailers who  are  accustomed  to  receiving  long  terms,  the 
granting  of  credit  is  an  important  step  in  securing  their 
business.  Because  of  its  strong  financial  position,  how- 
ever, the  Harris  Company  is  prepared  to  meet  this  de- 
mand for  credit  wherever  sound  business  judgment  war- 
rants its  use.  Bearing  in  mind  this  policy  of  the  com- 
pany, the  credit  manager  must  make  a  decision  as  to 
whether  or  not  the  following  requests  for  credit  and 
credit  extensions  should  bo  granted: 

Azopardo  y  Vilaseca,  hardware  retailers  in  Santiago, 
Cuba,  have  ordered  $4,635  worth  of  carpenters'  tools, 
requesting  the  order  to  be  carried  on  open  account,  pay- 
able 60  days  from  date  of  invoice. 


EXPORT    FINANCING    AND    CREDITS  505 

Manuel  Martinez,  a  wholesaler  and  retailer  in  San- 
tiago, Dominican  Republic,  has  requested  an  allowance  of 
35%  and  indefinite  extension  of  time  upon  an  invoice 
amounting  to  $230.95,  because  of  declining  prices  and 
hard  times. 

Alves  Comocho  &  Cia,  of  Rio  de  Janeiro,  indebted  for 
$2,530,  have  refused  to  accept  the  draft  and  demand  30% 
reduction  in  billed  prices  on  basis  of  brief  delay  in 
shipment. 

In  addition  to  the  salesman's  reports,  which  state 
that  each  of  these  firms  has  a  good  reputation  and  should 
be  a  good  credit  risk,  the  credit  manager  has  secured  the 
following  reports  from  a  foreign  credit  association  giv- 
ing a  brief  description  of  each  firm  and  the  experiences 
of  other  association  members  in  dealing  with  it : 

Azopardo  y  Vilaseca,  Avenue  Florida  69,  Santiago, 
Cuba,  are  hardware  retailers.  The  firm,  which  was  or- 
ganized as  a  limited  partnership  in  1916,  has  a  capital 
of  $40,000  and  a  volume  of  business  of  $73,000.  The  Can- 
adian Bank  of  Commerce  in  Havana  is  given  as  a  finan- 
cial reference.  Francisco  Alvardo,  the  senior  partner, 
is  a  Spaniard,  65  years  old ;  Estaban  Vilaseca,  the  junior 
partner,  is  a  native  of  Spanish  descent,  36  years  old. 
The  capital  stock  is  controlled  entirely  by  the  partners 
who  state  that  they  carry  life  insurance  of  $36,000  in 
favor  of  the  business.  The  experiences  and  opinions  of 
members  of  the  association  who  have  sold  this  firm  are 
as  follows : 

1.  Sold  for  three  years,  open  account  payable  60  days  from 

date  of  invoice.  Highest  recent  amount  $5288  in  October 
last  year.  Amount  noAV  owing  $40  which  was  written  off 
to  Profit  and  Loss.  Account  rated  unsatisfactor3^  This 
firm  cancelled  an  order  in  1918  after  it  was  shipped,  im- 
mediately after  the  armistice  stating  prices  were  going 
to  fall  and  refused  to  accept  the  shipment.  Our  agents 
disposed  of  the  shipment  at  a  loss  to  other  parties. 

2.  On  May  1st,  last  year,  we  invoiced  to  this  concern  approxi- 

mately $650  and  on  October  1st  approximately  $350. 
The  manager  of  this  company  was  in  Cuba  in  November 
or  December  of  1920  or  shortly  after  the  storm  broke, 
and  agreed  with  our  friends  that  their  a/c  could  be  paid 


506     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

at  their  convenience.  Our  manager  was  impressed  with 
the  honesty  of  this  firm,  thus  his  agreement.  This  ac- 
count has  been  paid  in  full  by  installments.  On  Novem- 
ber 1,  1921,  we  made  shipment  to  this  company  which 
invoiced  approximately  $1000  and  have  continued  to  do 
business  on  this  scale  ever  since.  This  indicates  that  we 
have  confidence  in  this  concern. 

3.  Have  not  sold  for  two  years.    Do  not  recollect  requests  for 

concessions. 

4.  Our  dealings  with  this  concern  have  been  limited  to  one 

transaction,  in  April  last  year,  which  involved  a  matter 
of  $136  which  was  shipped  on  open  account.  Our  in- 
voices on  this  order  were  dated  in  August  and  gave  them 
the  option  of  deducting  2%  for  payment  in  10  days. 
They  did  not,  however,  avail  themselves  of  this  discount 
and  payment  was  not  received  until  September. 

5.  Requested  extension  of  15-30  days.     Never  requested  other 

concessions.  The  account  is  not  considered  to  be  very 
satisfactory.  Last  fall  we  sold  this  house  a  bill  of  mer- 
chandise which  was  received  0.  K.  and  draft  accepted. 
When  the  draft  became  due  customer  desired  a  15  day 
extension  which  was  granted.  When  draft  became  due 
the  second  time  customer  claimed  that  he  had  asked  for 
a  30  day  extension  which  we  had  to  allow.  Now  he 
claims  that  it  will  not  be  possible  for  him  to  pay  until 
after  January  30th  and  we  are  now  waiting  to  see  what 
the  next  excuse  will  be.  This  is  the  only  transaction  that 
we  have  had  with  them. 

6.  Never  requested  concessions.  The  account  is  considered  to 
be  satisfactory  but  a  little  slow. 

7.  Have  sold  this  account  for  many  years.    On  terms  of  thirty 

days  net.  Highest  credit  $2650.  Bought  heavily  for 
many  years,  at  one  time  they  owed  $1575.  Were  usually 
slow  in  remitting. 

8.  Never  requested  concessions.    We  have  had  an  account  with 

this  firm  for  several  years  including  1920.  Their  account 
was  quite  active  in  a  small  way  only,  highest  purchase 
being  $70,  payments  very  slow.  In  view  of  a  number  of 
suits  lodged  against  them  we  corrected  our  terms  to  cash 
with  order. 

9.  Never  requested  concessions.     Would  advise  caution. 

10.  Do  not  consider  the  account  to  be  satisfactory.  Sold  in 
April  last  year  amounting  to  $378  on  terms  of  90  day 
draft.  Paid  part,  unable  to  collect  the  balance  and  charged 
off  $143  loss. 


EXPORT    FINANCING    AND    CREDITS  507 

11.  Requested  extension.     Do  not  consider  the  account  to  be 

satisfactory.  We  would  now  sell  with  advance  payment 
and  s/d  for  balance  only.  Our  last  shipment  to  above 
was  made  a  year  ago,  amounting  to  $1370.63.  Payments 
have  since  been  made  at  intervals  on  account.  Balance 
now  due  $99. 

12.  At  the  present  time  are  owing  $7.78  which  is  thirty  days 

overdue. 

13.  Sold  concern  for  $1000.     Requested  extension  of  45  days. 

Do  not  consider  the  action  on  the  part  of  customer  justi- 
fied. Order  was  accepted  with  the  understanding  that 
bills  would  be  paid  within  ten  days.  Customer  did  not 
pay  within  ten  days  in  spite  of  his  express  statements 
to  do  so.  Delayed  payment  45  days  beyond  maturity. 
Do  not  live  up  to  their  agreement. 

14.  In  financial  difficulties,  suggest  closing  all  credits  to  them. 

As  they  will  be  embargoed  within  few  days,  would  get 
immediate  action  on  account  of  any  import  to  pay  legal 
expenses. 

Manuel  Martinez  operates  a  wholesale  and  retail  busi- 
ness in  Santiago,  Dominican  Republic.  He  also  has  a 
small  branch  in  La  Vega.    His  capital  is  given  as  $125,- 

000.  and  his  volume  of  business  is  $200,000.  He  has  17 
employees,  apparently  has  a  good  reputation  in  his  dis- 
trict, and  has  given  the  Royal  Bank  of  Canada  in  San- 
tiago as  a  financial  reference.  The  experience  and  opin- 
ions of  the  members  of  the  association  dealing  with  this 
account  are  as  follows : 

1.  Sold  above  party  since  October,  1917,  payment  against  draft 

drawn  at  90  days.  Credit  at  times  as  high  as  $400.  Ship- 
ment made  in  June  of  $309.32,  for  which  he  wished  us  to 
accept  settlement  from  him  on  a  basis  of  50%  payable  in 
four  years. 

2.  Never  requested  concessions.     Have  not  had  a  similar  ex- 

perience.   The  account  is  considered  satisfactory. 

3.  Have  not  had  a  similar  experience.     Do  not  request  con- 

cessions. The  account  is  considered  satisfactory.  Last 
transaction  over  a  year  ago, — payments  were  made  fairly 
promptly.  In  January  inquired  for  prices  for  an  order  of 
about  $500. 

4.  Our  account  was  settled  0.  K. 


508     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

5.  Similar  experience.  Requested  indefinite  extension.  Also 
requested  price  allowance.  Requested  50%  allowance  on 
account  and  four  years  to  pay  balance.  In  our  opinion 
entirely  unjustifiable ;  we  did  not  grant  it  since  we  did  not 
consider  his  offer  an  acceptable  alternative  to  holding  him 
to  the  full  amount  of  the  account.  Our  agent  has  col- 
lected more  than  50%  of  the  bill. 

.6.  Have  not  had  a  similar  experience.  Never  requested  conces- 
sions. We  had  considerable  trouble  collecting  a  shipment 
made  on  July  28,  last  year,  amounting  to  $93.23,  which 
finally  was  settled  by  returning  a  part  of  the  merchandise 
on  August  31,  1921,  amounting  to  $73.50  and  cash  amount- 
ing to  $8.42 ;  the  remainder  we  have  been  trying  to  collect 
without  success. 

Alves  Comocho  is  a  hardware  wholesaler  in  Calle  Nep- 
tuno  No.  8,  Eio  de  Janeiro,  who  buys  75%  of  his  require- 
ments from  the  United  States  and  25%  from  Europe. 
The  house,  wliich  was  established  in  1900,  has  a  capital 
of  $150,000.  The  National  City  Bank  of  New  York  and 
the  Royal  Bank  of  Canada  are  given  as  financial  ref- 
erences. Alves  Comocho,  the  president  of  the  company, 
who  is  a  native  about  45  years  of  age,  states  that  he  car- 
ries a  $90,000  life  insurance  policy  in  favor  of  the  busi- 
ness. The  experience  and  opinions  of  members  of  the 
association  selling  this  account  are  as  follows: 

1.  Bolts:  Refused  our  drafts  without  any  justification  whatso- 

ever. Asked  us  to  take  their  orders  even  if  it  took  40 
weeks  to  complete  shipment.  We  took  their  order  with 
this  understanding  and  when  material  was  shipped  they 
refused  to  accept  our  drafts.  We  propose  to  sue  these 
people  and  place  the  matter  in  the  hands  of  our  attorney. 

2.  Vacuum  Bottles:  $867  merchandise  sold  in  April  two  years 

ago  on  sight  draft.  This  was  paid  O.K.  Sold  $1203  in 
January  last  year  on  sight  draft.  This  was  also  paid 
satisfactorily.     Have  not  had  any  other  experience. 

3.  Steam  &  Gas  Supplies:  Similar  experience.    Never  requested 

extension.  Do  not  consider  action  on  part  of  customer 
justified.  The  a/c  is  not  considered  satisfactory.  We  un- 
derstand concern  is  very  wealthy  but  reputed  to  be  rather 
tricky,  and  would  not  hesitate  to  take  advantage  of  a 
situation  like  the  present.  Two  years  ago  we  shipped 
goods  to  the  extent  of  $2500,  most  of  the  material  being 
outside  purchase  goods.     Refused  shipment  claiming  same 


EXPORT    FINANCING    AND    CREDITS  509 

material  could  be  purchased  by  them  at  Rio  de  Janeiro 
for  less  than  half  the  amount  of  our  bill.  We  exchanged 
considerable  correspondence  but  could  not  prevail  upon 
them  to  take  over  the  goods.  Finally  we  were  obliged  to 
accept  settlement  suggested  bv  them  which  resulted  in  a 
loss  of  $1350.00. 

3.  Nails :  Similar  experience.    Find  this  party  were  contentious 

and  assumed  flimsy  technicalities  for  rejecting  merchandise 
shoiild  it  be  to  his  advantage  to  do  so.  Do  not  consider 
action  on  part  of  customer  justified.  The  account  is  not 
satisfactory  as  this  party  is  difficult  to  deal  with  and 
unreliable  and  untrustworthy.  Our  account  has  been 
closed  out,  nothing  pending. 

4.  Enamelivarc :    Have  not  had  a  similar  experience,  but  do  not 

consider  the  account  entirely  satisfactory^  because  of  re- 
fusal to  pay  interest  and  other  charges  in  our  draft. 

5.  Luhricating  Oils:  Do  not  consider  account  satisfactory.  Have 

had  no  business  dealings  with  this  man.  We  understand 
that  he  lives  on  the  mistakes  of  others. 

6.  Saws :  Our   experience  with   above   concern   has   been   very 

costly  to  us;  on  a  shipment  amounting  to  about  $2400  the 
drawee  of  our  draft,  the  terms  of  which  were  90  day  ac- 
ceptance, refused  to  pay  same,  and  we  have  been  trying 
to  sell  the  consignment  to  other  parties  in  Buenos  Aires. 
We  intend  to  collect  any  loss  sustained  through  this  trans- 
action, by  suit. 

Problem  132 
The  Eliot  Company — Abuse  of  Credit 

The  Eliot  Company  is  engaged  in  the  mamifacture  of 
fancy  paper  novelties  used  for  purposes  of  decoration. 
Its  annual  sales  volume  is  approximately  $15,000,000  of 
which  amount  it  exports  $1,780,000.  The  headquarters 
of  the  export  department  are  at  the  factory  which  is 
located  in  upper  New  York  State.  The  firm  desires  to 
extend  its  export  trade  and  is  attempting  at  the  present 
time  to  introduce  its  lines  to  a  greater  extent  in  South 
American  markets.  It  has  experienced  some  little 
trouble  and  annoyance,  hoAvever,  from  the  abuse  of  its 
credit  privilege  by  some  of  its  South  American  cus- 
tomers. 


510    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

In  distributing  its  product  in  South  America  the  sales- 
men of  the  Eliot  Company  call  on  the  trade  once  every 
four  or  six  months.  Therefore,  they  are  unable  to  handle 
adjustments  or  to  check  up  shipments.  Their  product 
is  new  in  this  market  and  frequently  it  is  necessary  for 
the  salesmen  to  explain  and  even  demonstrate  the  meth- 
ods of  using-  these  colored  paper  novelties.  Whether  or 
not  a  salesman  secures  an  order,  he  supplies  each  dealer 
with  a  copy  of  the  latest  catalog  with  suggestions  for 
using  this  merchandise.  Every  six  months  the  salesmen 
return  to  the  home  office,  in  this  way  keeping  the  factory 
in  touch  with  the  demand  and  tendency  of  the  South 
American  trade. 

The  orders  for  paper  novelties  are  small  as  compared 
with  most  export  shipments,  ordinarily  amounting  to 
only  $200  to  $500.  Prices  are  quoted  in  United  States 
dollars,  f.  o.  b.  factory,  and  where  the  reputation  of  the 
buyer  is  satisfactory  a  60-day  sight  draft  is  attached  to 
the  documents.  If  the  customer's  credit  condition  is 
perhaps  slightly  questionable  a  sight  draft  is  used,  while 
customers  whose  ratings  are  uncertain  are  required  to 
pay  cash  in  advance.  If  a  customer  opens  a  letter  of 
credit  in  New  York  so  that  the  Eliot  Company  can  get  its 
money  as  soon  as  the  goods  are  shipped,  a  2%  discount 
is  allowed. 

South  American  customers  are  aware  of  the  fact  that 
it  takes  from  three  weeks  to  a  month  for  their  letters  to 
reach  the  Eliot  factory.  A  number  of  them  have  been 
taking  advantage  of  this  fact  by  claiming  small  damages 
to  the  goods  in  transit  in  order  to  return  the  draft  and 
have  it  changed  by  a  small  amount.  This  means  that 
the  draft  is  sent  to  South  America  mth  the  papers  but  is 
not  accepted  by  the  customer.  It  is  therefore  returned 
to  the  company  for  adjustment.  If  the  adjustment  is 
granted,  the  draft  is  sent  back  to  South  America  and 
then,  after  another  60  days,  payment  is  made.  By  this 
procedure  the  customer  is  able  to  extend  the  credit  terms 
almost  double  the  time  originally  extended.  For  example, 
a  customer  in  Valparaiso,  Chile,  ordered  $337  worth  of 


EXPORT    FINANCING    AND    CREDITS  511 

goods.  When  the  papers  arrived  he  refused  to  accept 
the  draft  chiiming  damages  of  $7.35.  Consequently,  the 
bank  returned  the  draft  to  the  EHot  Company  asking 
that  it  be  changed  accordingly.  He  accepted  the  draft 
when  it  was  sent  to  him  the  second  time  after  two  months 
had  elapsed,  thus  extending  his  credit  terms  from  60  days 
to  almost  120  days. 

The  Eliot  Company  believes  that  the  Latin-American 
love  for  decoration  and  display  gives  promise  of  devel- 
oping a  permanent  market  for  its  goods  in  the  country 
in  the  future.  Colored  paper  novelties  have  not  been 
introduced  to  any  great  extent  and  the  company  has  in- 
structed its  salesmen  to  be  lenient  with  customers  and 
humor  their  whims  in  order  to  gain  their  good-will  and 
secure  their  business.  It  has  not  been  found  advisable 
to  establish  a  central  distributing  warehouse  to  handle 
all  South  American  shipments,  from  which  claims  could 
be  checked  for  damaged  goods  or  alleged  shortages.  The 
company  has  made  an  investigation  of  its  packing 
methods,  however,  and  is  confident  that  the  fault  does 
not  lie  with  the  shipping  department. 

The  company's  annual  trade  in  South  America  at  pres- 
ent is  approximately  $400,000.  A  substantial  number  of 
its  customers,  whose  combined  trade  is  worth  approxi- 
mately one-fourth  of  this  amount,  have  been  deferring 
payments  by  claiming  minor  damages  and  returning 
drafts  for  extension.  Consequently,  the  company  has 
been  forced  to  borrow  almost  twice  as  much  money  as 
had  previously  been  planned  to  finance  this  part  of  its 
South  American  business.  Besides  the  interest  charges 
the  additional  office  work  increases  the  expense  of  han- 
dling this  business.  These  tactics  of  Latin-American  cus- 
tomers appear  to  be  spreading  and  if  the  company  is 
too  lenient  it  is  quite  possible  that  an  even  larger  num- 
ber will  use  this  means  of  lengthening  the  time  required 
for  payment.  On  the  other  hand,  many  South  American 
customers  look  askance  at  dealing  with  a  United  States 
manufacturer.  They  suspect  that  the  salesmen  greatly 
exaggerate  the  quality  of  the  goods  and  the  service  to 
be  expected. 


512     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

If  the  drafts  are  not  clianged  to  meet  the  requests  of 
the  customers,  the  salesmen's  work  will  undoubtedly  be 
harder  and  the  selling  costs  increased.  Even  at  the  pres- 
ent time  the  company  is  securing  a  profit  on  less  than 
half  its  South  American  business.  With  foreign  compe- 
tition and  the  rate  of  exchange  against  exporting  Ameri- 
can goods,  there  is  some  question  as  to  whether  the 
Eliot  Company  can  introduce  its  product  unless  it  secures 
the  whole-hearted  cooperation  of  the  dealers. 

What  action  should  the  Eliot  Company  take  on  the 
large  number  of  small  damage  claims  of  its  South  Ameri- 
can customers'? 


Problem  133 

The  Eliot  Company — Credit  Procedure 

The  Eliot  Company  believes  that  a  part  of  its  loss 
due  to  the  abuse  of  credits  (see  Problem  132)  is  owing 
to  the  fact  that  it  has  not  watched  very  carefully  the 
credit  standing  of  customers  after  application  has  been 
passed  upon  in  connection  with  the  first  order.  In 
studying  the  problem  of  how  to  keep  their  credit  out- 
standings checked  up  so  as  to  avoid  losses  because  of 
frequent  business  changes,  the  company  is  seriously  con- 
sidering a  modification  of  the  plan  used  by  a  concern 
exporting  electrical  apparatus.  The  organization  under 
four  main  divisions  or  departments  and  their  operation 
are  described  by  the  credit  manager  as  follows :  • 

Administrative — Under  the  Export  Manager. 
Sales — Under  the  Export  Sales  Manager. 
Stores  and  Service — Under  the  Stores  Manager. 
Credit  and  Financial —  Under  the  Credit  Manager. 

Under  this  plan  of  organization,  it  was  aimed  to  bring 
under  the  head  of  each  Manager  certain  functions  which 
logically  would  fall  to  him.  Naturally,  the  Sales,  Stores 
and  Credit  Managers  would  report  for  discipline  and 
instructions  to  the  Export  Manager. 


EXPORT    FINANCING    AND    CREDITS  513 

Sales  Manager  would  administer  matters  having  to  do 
either  directly  or  indirectly  with  sales,  promotion,  adver- 
tising, the  control  of  travelers,  solicitation  of  business, 
fixing  of  prices,  etc. 

Stores  Manager's  division  embraces  all  the  company's 
activities  relating  to  service,  transportation,  insurance, 
office  service,  accounting  and  matters  of  general  office 
routine. 

To  the  Credit  Manager  is  delegated  the  supervision  of 
all  matters  affecting  the  Company's  credit  relations  with 
its  customers  and  relations  with  banks  and  financial  in- 
stitutions. By  the  very  nature  of  our  organization,  each 
department  is  closely  in  contact  with  the  other.  There 
are  frequent  consultations  between  the  four  managerial 
heads. 

2.  Process  of  Handling  Applications. 

The  Credit  Department  is  notified  promptly  by  the 
Sales  Department  of  inquiries  received  from  new  cus- 
tomers so  that  a  credit  investigation  may  immediately 
be  begun.  The  same  procedure  is  followed  upon  receipt 
of  orders  accompanied  by  cash  or  upon  advice  from 
travelers  of  prospective  business.  As  complete  credit 
information  as  possible  is  submitted  by  traveling  repre- 
sentatives and  orders  are  largely  entered  immediately 
upon  receipt  of  credit  reports  from  the  salesmen  but 
efforts  are  immediately  made  to  substantiate  all  credit 
reports  received  from  such  representatives. 

Where  orders  are  received  directly  and  not  through 
the  agency  of  representatives  or  travelers,  data  is  se- 
cured from  either  Dun  or  Bradstreet  and  any  one  or  sev- 
eral of  the  larger  banks  engaged  in  financing  export  ship- 
ments, which  maintain  numerous  correspondents  or  their 
own  branches  in  other  countries.  A  request  for  a  clear- 
ance of  the  prospect  is  made  on  the  Foreign  Credit 
Interchange  Bureau;  the  Pliiladelphia  Commercial  Mu- 
seum and  the  National  Credit  Office  are  also  frequently 
consulted  for  data.  If  information  is  not  obtainable  from 
any  of  these  sources,  our  banking  friends  will,  upon  re- 


514     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

quest,  cable  or  write  directly  to  our  correspondent  for 
the  required  reports. 

Where  request  is  received  for  longer  terms  than  the 
credit  standing  of  the  customer,  condition  of  his  coun- 
try or  other  circumstances  would  seem  to  warrant, 
counter  terms  are  usually  offered,  that  is,  such  as  the 
suggestion  that  the  prospect  arrange  for  banker's  accep- 
tance, acceptance  credit,  etc.  or  remit  a  portion  in  cash. 
If  possible,  an  effort  is  made  to  secure  the  business  on 
terms  that  are  acceptable  to  us. 

3.  Method  of  Checking  Up  on  Outstanding  Credits. 

At  the  first  of  each  month,  there  are  made  up  by  the 
Accounting  Department,  statements  in  duplicate  of  all 
open  accounts  appearing  on  our  ledgers,  whether  the 
amounts  so  carried  are  debits  or  credits.  But  the  origi- 
nal and  duplicate  statements  are  forwarded  to  the  Credit 
Department.  Where  sales  have  been  made  on  open  ac- 
count, the  original  statements  are  immediately  mailed 
to  customer  and  this  is  also  done  at  times  where  sales 
have  been  made  on  special  terms,  such  as  sight  or  time 
drafts. 

Where  sales  are  made  on  special  terms,  these  state- 
ments are  carefully  checked  with  all  outstanding  drafts 
to  insure  that  all  items  appearing  on  our  ledgers  have 
been  properly  covered  by  drafts.  Forwarding  banks  in 
this  country  are  instructed  in  each  instance  to  notify 
us  when  drafts  have  been  accepted,  when  they  wdll  mature 
and  when  they  are  paid.  If,  within  a  reasonable  time 
after  the  expiration  date  proceeds  have  not  been  received, 
forwarding  bank  is  requested  either  to  write  or  cable 
for  advice. 

Where  drafts  drawn  to  cover  individual  shipments 
are  in  excess  of  $500.00,  the  forwarding  bank  is  in- 
structed to  cable  notice  of  non-acceptance  and  non-pay- 
ment. Usually  where  the  amount  is  less  than  $500.00 
instructions  are  given  to  notify  by  mail. 

All  drafts  are  drawn  in  duplicate,  the  original  for- 
w^arded  to  the  banl?: — the  duplicate,  together  with  copy 


EXPORT    FINANCING    AND    CREDITS  515 

of  letter  of  advice  to  the  customer  and  other  pertinent 
documents  are  held  in  the  correspondence  tiles  of  the 
Credit  Department  for  follow-up  purposes.  Record  of 
all  drafts  drawn  is  carried  on  a  draft  record  card — one 
card  for  each  individual  customer.  On  this  card  space 
is  provided  for  date  and  number  of  draft,  amount,  name 
of  bank  through  which  it  was  drawn,  tenor,  wdth  space  for 
proceeds  received,  total  amount  charges  paid,  date  of 
maturity,  acceptance  of  draft  and  payment. 

All  correspondence  relating  to  individual  drafts  is  at- 
tached to  the  papers  affecting  this  particular  item.  A 
copy  of  the  customer's  statement  of  accounts  is  filed  in 
the  folder  containing  duplicate  drafts  with  relative  cor- 
respondence. 

Advice  of  payment  from  liank  with  proceeds,  when  re- 
ceived, is  first  forwarded  to  the  Credit  Department. 
Notation  is  made  of  such  payment  and  definite  advice 
given  to  the  Accounting  Department  and  the  Cashier's 
Department  as  to  disposition  of  the  proceeds  and  any 
charges  which  may  have  been  deducted. 

Is  the  plan  applicable  to  the  Eliot  Company? 

Problem  134 

Bradford  Bolt  Company — Handllng  Depreciated 
Exchange  Cases 

On  October  28,  1921  the  Bradford  Bolt  Company  re- 
ceived a  request  from  Joaquin  Vazquez,  a  hardware 
wholesaler  in  Buenos  Aires,  for  a  60-day  extension  in 
which  to  pay  his  bill  of  $1,130.  The  Bradford  Company 
has  sold  hardware  to  this  merchant  for  the  past  four 
years  on  terms  of  60-day  sight  drafts,  documents  against 
acceptance.  Since  all  bills  had  been  paid  promptly  when 
due  and  this  merchant  was  considered  a  good  customer, 
his  request  for  a  60-day  extension  was  granted ;  but  when 
the  time  arrived  for  settlement,  payment  was  not  forth- 
coming. In  answer  to  a  letter  of  the  Bradford  Company, 
Vazquez  stated  that  because  the  rates  of  exchange  had 
fallen  after  he  had  received  his  goods,  he  was  unable 


516    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

to  make  payment ;  he  requested  the  Bradford  Company  to 
reduce  its  prices  40%  in  order  to  permit  him  to  dispose 
of  his  goods  and  meet  his  obligations.  This  request  was 
refused,  whereupon  Vazquez  replied  that  because  of 
poor  business  conditions  he  was  compelled  to  extend 
credit  accommodations  to  his  customers  and  that  he  could 
not  pay  the  bill  at  that  time.  When  pressed  for  a  defi- 
nite statement  as  to  when  he  would  settle  his  account, 
he  refused  to  make  any  promise,  but  assured  the  com- 
pany that  he  would  pay  as  soon  as  possible. 

The  company  reported  its  experience  to  the  head  of  a 
credit  interchange  association  of  which  it  was  a  member, 
requesting  a  report  of  the  experiences  of  other  members 
of  the  association.  From  this  report  the  company 
learned  the  following  facts: 

Joaquin  Vazquez  has  been  in  the  wholesale  hardware 
business  since  October  30,  1906.  His  capital  stock  was 
reported  as  $230,000.  The  following  statements  of  the 
experiences  of  other  members  of  the  association  were 
made : 

1.  Similar  experience.     Never  requested  an  extension.     Con- 

sider action  on  part  of  customer  justified.  Our  outstand- 
ing account  has  been  about  $5000  but  has  been  gradually 
cut  down  to  small  payments.  We  are  satisfied  with  the 
progress  that  has  been  made  in  meeting  the  total  out- 
standing.    Consider  the  account  satisfactory. 

2.  Never  requested  an  extension.     Our  last  draft  for  $215.00 

was  promptly  discounted  on  April  5,  of  last  year. 

3.  Took  five  months'  extension.      Have   not  requested   other 

concessions. 
Invoice  of  Oct.  1920  amount  $181.02  paid  January  18,  1921. 
Invoice  of  Dec.  1920  amount  $177.47  paid  May  28,  1921. 

4.  Never  requested  an  extension.     Consider  the  account  satis- 

factory.   Pay  invoices  at  maturity  (60  days). 

5.  Never  requested  concessions.     The  account  is  considered  to 

be  satisfactory. 

6.  "Our   experience  has   been   most   satisfactory.     Never   re- 

quested extension." 


EXPORT    FINANCING    AND    CREDITS  517 

7.  Bill  of  $1200,  dated  March  4,  paid  in  August.     Terms  one 

third  cash  and  2  notes  of  $400  each.     One  note  paid, 
other  due  this  month. 

8.  Somewhat  similar  experience.     Requested  indefinite  exten 

sion.  Also  cancellation.  When  the  market  broke,  they 
requested  that  we  withhold  further  shipments.  This  we 
cheerfully  acceded  to  because  conditions  justified  their 
request.  Consider  action  justified.  Invoice  of  Aug.  10, 
1920,  for  $1107  at  60  days,  payment  received  August  31, 
1920.  Invoice  of  Oct.  7,  1920,  for  $450.00.  They  wrote 
on  account  of  conditions  there,  they  could  not  pay  until 
conditions  permitted.  Early  in  Jan.  1921  a  payment  of 
*  $200  was  received  and  in  the  latter  part  of  1921,  the 
balance  was  paid.  Consider  the  account  satisfactory.  We 
would  not  hesitate  to  ship  them  their  requirements  today 
and  believe  that  only  conditions  beyond  their  control  are 
preventing  them  from  making  good. 

9.  Sold  in  1919  and  1920.     Highest  credit  $392.02.     Paid  as 

agreed,  60  days  sight. 

10.  Our  representative  called  on  above  firm  during  Sept.  and 
found  the}'  were  getting  a  fairly  good  volume  although 
greatly  curtailed  from  normal.  They  have  reduced  their 
overhead  to  meet  conditions  and  are  reducing  their  mdse. 
The  account  is  satisfactory. 

The  Bradford  Compaiw  has  had  similar  experience  in 
Brazil,  where,  because  the  rate  of  exchange  had  fallen, 
dealers  failed  to  make  payments  when  their  obligations 
came  due.  In  one  instance  four  Brazilian  dealers  were 
induced  to  make  collateral  deposits  in  their  local  banks 
covering  the  amount  of  their  drafts  at  the  going  rate  of 
exchange.  Since  funds  held  by  the  bank  as  the  property 
of  the  drawee  could  be  attached  by  creditors  in  case  of 
bankruptcy,  the  company  gave  each  dealer  a  receipt  for 
the  amount  deposited  as  part  payment  of  the  draft,  the 
balance  and  tinal  adjustment  to  be  made  on  a  future  date 
according  to  the  rate  of  exchange  at  that  time.'  In 
other  instances  the  company  accepted  payment  in  milreis 
at  the  rate  of  exchange  prevalent  when  the  goods  were 
ordered.  This  amount  was  deposited  in  the  local  bank 
at  interest,  with  the  intention  of  leaving  it  there  until  the 
rate  of  exchange  returned  to  or  at  least  approached  par. 


518     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Both  these  plans,  however,  tied  up  the  company's  capital 
and  in  the  latter  instance  the  firm  ran  the  additional  risk 
of  loss  from  further  fall  in  exchange. 

It  was  suggested  that  the  company's  salesmen  call 
upon  Joaquin  Vazquez  and  demand  payment  and  if  this 
failed  the  company  should  resort  to  the  courts  for  im- 
mediate settlement.  The  company  had  been  the  victim  of 
so  many  similar  experiences  that  it  seemed  necessary 
to  make  an  example  of  at  least  one  case  in  order  to  show 
other  dealers  of  the  same  ilk  that  the  company  could  not 
be  trifled  with.  This  plan  had  the  disadvantage  of  an- 
tagonizing Vazquez  and  of  running  the  risk  of  losing  the 
friendship  of  other  customers  as  well.  Furthermore, 
previous  experiences  of  the  company  in  litigation  in  for- 
eign courts  had  shown  that  it  was  difficult  for  an  Ameri- 
can firm  to  secure  an  unbiased  decision  and  that  the  de- 
fendant was  often  able  to  take  advantage  of  the  techni- 
calities of  the  local  law  to  the  detriment  of  the  plain- 
tiff. 

As  an  alternative  plan  it  was  suggested  that  the  com- 
pany should  resort  to  arbitration  in  order  to  secure  a 
definite  settlement  with  Vazquez  which  would  be  satis- 
factory to  both  parties  and  would  preserve  their  friend- 
ship and  mutual  good-will.  It  was  proposed  that  the 
company  should  secure  the  services  of  the  secretary  of 
the  local  Chamber  of  Commerce  to  arbitrate  the  case  and 
decide  what  should  be  done.  In  case  the  secretary's  de- 
cision should  prove  unsatisfactory  to  Vazquez,  it  was  pro- 
posed that  both  parties  should  agree  upon  a  man  of  recog- 
nized business  judgment  and  integrity  to  act  as  arbi- 
trator. It  was  possible,  however,  that  Vazquez  would 
not  relish  having  his  private  business  affairs  submitted 
to  a  third  person.  This  plan  also  had  the  danger  that 
the  arbitrator  would  attempt  to  compromise  rather  than 
to  secure  a  just  decision.  Once  a  definite  position  had 
been  taken  by  this  arbitrator,  it  would  be  difficult  for  the 
company  to  overrule  his  decision  and  secure  its  rights  if 
a  biased  and  unfair  decision  were  reached. 

Another  exporter  to  Argentina  has  proposed  the  fol- 
lowing solution — first,  draft  in  dollars,  which  importer 


EXPORT    FINANCING    AND    CREDITS  519 

is  to  have  option  of  taking  up  at  maturity  wdth  his  note 
secured  by  collateral  deposit  with  collecting  bank; 
second,  draft  in  pesos,  conversion  of  dollar  invoice  at 
rate  slightly  below  average  for  preceding  month,  ex- 
porter to  convert  pesos  back  into  dollars  when  the  op- 
portunity to  do  so  without  loss  presents  itself.  A  defi- 
nite policy  should  be  adopted  of  drawing  drafts  upon  im- 
porters in  their  own  currencies.  Protection  may  be  had 
to  some  extent  by  hedging.  It  is  not  certain,  however, 
that  at  all  times  the  exporter  would  find  it  possible  to 
dispose  of  futures  in  Argentine  pesos.  In  order  to  avoid 
losses,  such  as  might  have  occurred  in  the  sununer  of 
1920,  a  fund  should  be  accumulated  for  meeting  such  con- 
tingencies as  they  arise. 

What  action  should  the  Bradford  Company  have  taken 
in  settling  its  account  with  Joaquin  Vazquez? 


Problem  135 

Bryzlak  &  Company — Act  of  Protest* 

On  July  10,  1920,  Bryzlak  &  Company,  a  small  New 
York  export  house,  shipped  to  Jamaica  and  billed  to  the 
account  of  its  agent,  Mr.  Garcia,  35  cases  and  2  barrels  of 
cotton  seed  oil  on  terms  of  thirty  days  sight,  documents 
against  acceptance.  At  the  same  time,  it  shipped  10 
cases  of  cotton  seed  oil  and  2  cases  of  shortening  to  T. 

•Exporters  are  by  no  means  in  agreement  as  to  the  proper  procedure  with 
regard  to  protesting  drafts  which  are  not  accepted  or  not  paid  at  maturity. 
Many  exporters  believe  that  a  draft  should  never  be  protested  for  non- 
acceptance.  Legal  action  is  so  expensive  and  uncertain  that  protest  may 
antagonize  the  customer  and  make  peaceful  settlement  difficult.  In  the  case 
of  non-payment  of  a  draft,  it  is  believed  that  banks  should  be  instructed 
in  advance  to  protest  the  draft  except  where  the  exporter  has  reason  to 
believe  that  tlie  customer  will  make  suitable  arrangements.  Ordinarily  the 
exporter  cannot  afford  to  forego  the  legal  hold  upon  his  customer  which 
the  protest  gives  him.  In  some  countries  protest  must  be  made,  if  at  all, 
within  24  hours  of  maturity.  Nevertheless,  in  spite  of  the  greater  legal 
hold,  the  costs  of  protest  and  the  remote  possibility  of  successful  litigation 
cause  many  exporters  to  waive  protest  even  upon  non-payment  of  draft 
at  maturity.  Information  as  to  protest  laws  may  be  secured  from  the 
Commercial  Laws  Division  of  the  Bureau  of  Foreign  &  Domestic  Commerce. 


520    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Ho  Sange  of  Falmouth,  Jamaica.  The  drafts  for  these 
shipments  were  accepted;  the  goods  were  claimed  on 
arrival;  but  the  obligations  were  not  paid  when  due. 

On  October  15  the  company  wrote  its  agent  requesting 
him  to  collect  immediately  the  overdue  account  of  T.  Ho 
Sange  and  to  secure  payment  of  a  bill  of  $24.59  from  Mr. 
Bolton,  a  customer  in  Kingston ;  the  firm  also  called  the 
agent's  attention  to  the  fact  that  his  own  draft  for  the 
shipment  of  35  cases  and  2  barrels  of  cotton  seed  oil 
had  not  been  paid.  Receiving  no  reply,  the  company 
wrote  Mr.  Garcia  on  December  1,  1920,  and  again  on  Feb. 
1,  1921.  Being  convinced  that  their  agent  intended  to 
ignore  all  communications,  Bryzlak  &  Company  on  April 
29,  1921,  wrote  to  a  large  firm  of  commission  agents  in 
Kingston  asking  for  the  name  of  a  reliable  solicitor  in 
whose  hands  the  task  of  collection  might  be  placed.  Upon 
being  referred  to  Mr.  Wendall  in  Kingston  the  company 
entered  into  the  following  correspondence : — 

BRYZLAK   &   COMPANY 

Beaver  Street 
New  York 

June  9,  1921, 

Mr.  Charles  Wendall, 
Barry  Street, 
Kingston,  Jamaica. 

Dear  Sir : — 

Messrs.  Hanton  &  Grace,  Ltd.  of  your  city,  advising  us  to 
get  in  touch  with  you  relative  to  the  collection  of  some  out- 
standing accounts  of  long  duration,  we  are  taking  the  liberty  of 
addressing  you  with  this  point  of  view. 

One  account  to  the  amount  of  $844.89  is  against  Jose  Garcia, 
for  35  cases  and  2  barrels  of  COTTON  SEED  OIL,  shipped  on 
July  10,  1920,  on  terms  of  30  daj^s,  sight.  After  accepting 
the  draft,  the  goods  were  clahned  on  arrival,  but  the  money 
never  paid,  in  spite  of  several  times  receiving  promises  from 
Mr.  Garcia  to  meet  his  obligations.  Although  having  written 
him  several  times  lately,  we  were  unable  to  be  favored  with 
even  a  reply. 

The  other,  of  $219.50,  is  against  T.  IIo  Sange  of  Falmouth, 
for  10  cases  of  COTTON  SEED  OIL  and  2  cases  of  SHORT- 


EXPORT    FINANCING    AND    CREDITS  521 

ENING,  likewise  shipped  in  July  10.  Tliis  concern  we  are 
given  to  understand  is  in  the  hands  of  a  receiver ;  consequently 
we  presume  nothing  could  be  done,  except  through  the  Adminis- 
trator General.  However,  our  Bank  here  holds  a  receipt  from 
Garcia  for  the  collection  of  £30  from  T.  IIo  Sange,  for  which 
we  naturally  hold  Garcia  responsible  and  likcAvise  wish  to 
collect. 

On  a  draft  against  H.  O.  Bolton  of  Kingston,  to  the  amount 
of  $187.44,  Mr.  Garcia  remitted  $162.85,    thusly    being    short 

All  in  all,  Mr.  Garcia  is  indebted  to  us  to  the  extent  of  $869.48 
in  American  currency,  and  £30  in  English  currency.  Against 
this  we  owe  Mr.  Garcia  commissions  amounting  to  $138.67, 
which  we  however  do  not  wish  to  consider,  or  remit  for,  until  we 
have  received  full  payment  from  him,  w^ith  interest. 

Will  you  kindly  let  us  know  by  return  mail  in  which  man- 
ner you  wish  to  proceed  in  collecting  this  money,  also  how  much 
the  expense  would  be  to  us  for  your  services. 

Trusting  to  be  favored  with  a  replv  bv  return  mail  Ave  he^ 
to  remain,  '  ° 

Yours  faithfully, 

(Signed)   Bryzlak  &  Company. 

BRYZLAK  &  COMPANY 

Beaver  Street 
New  York 

June  9,  1921. 
TO  THE  ADMINISTRATOR  GENERAL 
of  the  T.  HO  SAXGE  &  CO.  ESTATE 
of  FAL:\[01'TH,  JAMAICA. 
Dear  Sir: — 

We  herewith  authorize  Mr.  Charles  Wendall  of  Kingston 
to  collect  for  our  account  whatever  dividend  will  be  paid  on  the 
original  amount  of  $219.50,  less  £30,  in  English  monev,  col- 
lected by  Joso  Garcia,  of  Kingston. 

Yours  faithfully, 
(Signed)  Bryzlak  &  Company. 


522     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Charles  Wendall  Barry  Street, 

Solicitor 

KINGSTON, 

JAMAICA. 

22nd  June  1921. 

Bryzlak  &  Company, 

Beaver  Street, 

New  York,  New  York, 

U.  S.  A.    ■ 

Gentlemen : — 

We  have  your  letter  of  Dth  instant  asking  ns  to  take  up  the 
following : 

Jose  Garcia  $844.89 

T.  Ho  Sange  219.50 

H.  0.  Bolton  24.59 

and  we  understand  that  on  the  first  claim  Garcia  is  liable  to  you 
as  Acceptor  of  a  Bill;  on  the  second  claim  he  is  liable  to  you  for 
£30  collected  and  the  Estate  of  Ho  Sange  for  the  balance;  and 
the  third  claim  he  is  probably  liable  to  you  for  $24.59,  or  H.  0. 
Bolton  is  liable  to  you  thereon. 

As  against  these  Mr.  Garcia  will  be  entitled  to  set  off  his  com- 
missions of  $138.67.  In  reply  to  your  letter  we  beg  to  say  that 
we  shall  be  willing  to  undertake  collection  of  these  claims  on  a 
107o  basis,  but  if  suit  be  instituted  you  will  be  responsible  for 
the  costs  of  suit.  Of  course  in  the  case  of  success  5''ou  will  re- 
cover same  from  the  Defendants. 

Costs  of  uncontested  suit  will  not  be  heavy,  but  any  claim 
over  $200  which  is  contested  might  involve  appreciable  ex- 
pense. 

We  gather  that  you  do  not  desire  us  to  proceed  with  the 
matter  until  we  hear  further  from  you.  It  would  be  advisable 
for  you  to  send  us  the  accepted  Drafts  on  which  you  are  claim- 
ing, and  in  the  case  where  there  is  no  draft  then  the  Contracts. 

Yours  faithfully, 

(Signed)    Charles  Wendall. 

At  this  point  in  the  negotiations,  Bryzlak  &  Company 
w^ere  advised  by  their  bankers  to  make  one  more  at- 
tempt to  collect  the  overdue  accounts  by  corresponding 
directly  with  Mr.  Garcia.  This  course  was  taken  on 
July  7  but  as  no  reply  was  received  by  September  9  the 
firm  wrote  to  its  solicitor  as  follows : — 


EXPORT    FINANCING    AND    CREDITS  623 

September  9,  1921. 

Charles  Wendall, 
Kingston,  Jamaica. 

Dear  Sir : 

Our  last  appeal  to  Mr.  Garcia  for  payment  being  in  vain,  in 
fact,  not  even  receiving  the  courtesy  of  a  reply,  we  would  now 
ask  you  to  kindly  proceed  against  him  under  the  arrangement 
previously  made  with  your  good  selves. 

We  believe  we  have  furnished  you  with  sufficient  details  to 
approach  Mr.  Garcia,  for  the  purpose  of  ascertaining  just  what 
he  will  and  can  do. 

Should  you  be  forced  to  proceed  through  the  courts,  kindly 
advise  just  what  papers  you  require  from  us  here  to  substan- 
tiate this  action  and  same  will  be  immediately  submitted. 

Please  bear  in  mind  that,  relative  to  T.  Ho  Sange,  our  inten- 
tions are  to  proceed  criminallj^  against  Garcia  for  misappropria- 
tion of  funds,  if  payment  is  not  made  forthwith,  without  any 
excuse  whatever. 

Trusting  to  hear  from  you  by  return  mail  and  hoping  you  will 
take  the  necessary  steps  to  secure  payment  in  one  manner  or 
another,  we  beg  to  remain. 

Yours  faithfully, 

(Signed)   Bryzlak  &  Company. 

Charles  Wendall  Barry  Street, 

Solicitor 

KINGSTON, 

JAMAICA. 

25th  September  1921. 

Bryzlak  &  Company, 
Beaver  Street, 
New  York,  N.  Y. 
IT.  S.  A. 

Gentlemen : 

We  have  your  letter  of  9th  iust.  and  we  are  taking  up  the  mat- 
ters referred  to.  Please  however  send  us  the  drafts,  and  all  cor- 
respondence. 

Yours  faithfully, 

(Signed)   Charles  Wendall. 


524     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  solicitor  immediately  got  in  touch  with  the  Royal 
Bank  of  Canada  in  Kingston  which  had  handled  the 
drafts  in  the  transaction.  An  "Act  of  Protest"  was 
drawn  up  stating  that  as  the  drafts  liad  been  dishonored 
and  no  adjustment  had  been  made,  collection  had  been 
placed  in  legal  hands ;  this  statement  was  sworn  to  and 
signed  by  a  bank  officer  before  a  Notary  Public ;  and  the 
papers  were  forwarded  to  Mr.  Garcia.* 

The  next  day  Mr.  Wendall  sent  the  following  letter  to 
Bryzlak  &  Company. 

30th  September  1921. 
Bryzlak  &  Company, 
Beaver  Street, 
New  York,  N.  Y. 
U.  S.  A. 

Gentlemen : 

We  have  to  report  that  Mr.  Garcia 's  solicitor  called  on  us 
to-day,  and  we  gather  that  Mr.  Garcia  acknowledges  liability 
except  where  otherwise  stated  herein,  and  he  is  endeavoring  to 
make  immediate  arrangements  to  raise  a  loan  to  satisfy  the 
amount. 

As  to  H.  0.  Bolton  he  states  that  Mr.  Bolton  refused  delivery 
and  that  he  sold  the  goods  for  what  they  could  fetch,  and  remit- 
ted to  you  $163.68  to  close. 

We  have  impressed  upon  Mr.  Garcia 's  Solicitor  that  the 
amount  collected  from  Ho  Sange  should  be  immediately  paid 
over  to  us,  and  we  expect  to  get  this  in  a  very  short  time. 

Yours  faithfull}^, 

(Signed)  Charles  Wendall. 

As  nothing  further  had  happened  by  November  18th 
Mr.  Wendall  advised  that  unless  Mr.  Garcia  took  some 
action  before  the  26,  suit  should  be  immediately  in- 
stituted. On  December  9,  Bryzlak  &  Company  received 
the  following  letter  from  their  solicitor: 

*The  purpose  of  the  "Act  of  Protest"  is  to  make  known  to  the  defaulter 
the  fact  that  the  creditor  has  put  the  matter  in  lejjal  hands  and  will  force 
payment  if  necessary.  Protest  is  a  preliminary  step,  and  because  of  its 
affect  upon  the  credit  standing'  of  the  individual  it  is  frequently  effective 
in  securing  settlement. 


EXPORT    FINANCING    AND    CREDITS  525 

5  December,  1921. 
Bryzlak  &  Company, 
Beaver  Street, 
New  York,  N.  Y. 
U.  S.  A. 
Gentlemen : — 

We  have  pleasure  in  reporting  that  we  have  collected  from 
Mr.  Garcia  the  sum  of  £105,  on  account,  being  £30  the  amount 
collected  from  Ho  Sange  and  £75  on  account  of  his  draft. 

He  is  endeavoring  to  raise  a  Loan  on  his  properties,  and  hopes 
soon  to  be  in  a  position  to  remit  the  balance. 

We  enclose  Sight  Draft  on  the  Royal  Bank  of  Canada  No. 
4269  for  $424.98  of  even  date  in  our  favor  by  us  endorsed  by 
you. 

Yours  faithfully, 

(Signed)    Charles  Wendall. 

Additional  payments,  however,  were  not  forthcoming 
and  on  February  2  Bryzlak  &  (Amipany  wrote  ^Ir. 
Wendall  as  follows: 

BRYZLAK  &  COMPANY 

Beaver  Street 

New  York 

February  2,  1922. 
Mr.  Charles  Wendall. 
Kingston,  Jamaica. 
Dear  Sir : 

With  no  intention  whatever  to  appear  bothersome,  but  real- 
izing that  practically  two  months  have  gone  by  since  the  part 
payment  of  Mr.  Garcia  was  received,  likewise  most  anxious  to 
definitely  close  this  unfortunate  transaction,  we  would  now  ask 
you  to  take  the  necessary  steps  for  accomi)lishing  our  purpose. 

It  might  interest  you  to  know  of  having  received  a  nice  letter 
from  Mr.  Garcia  in  the  early  part  of  January,  in  which  he  refers 
to  his  indebtedness  as  follows : — 

"The  matter  of  my  loan  is  now  proceeding  and  as  soon 
as  the  documents  are  through,  will  settle  the  outstand- 
ing. ' ' 
May  we  not  hear  from  you  by   return   mail   regarding   the 
above,  or  at  least  as  to  what  has  transpired  and  liow  the  matter 
stands  at  the  present  time. 

Very  truly  yours, 

(Signed)   Bryzlak  &  Company. 


526    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Charles  Wendall  Barry  Street, 

Solicitor 

KINGSTON, 

JAMAICA. 

February  16,  1922. 
Bryzlak  &  Company, 
Beaver  Street, 
New  York,  N.  Y. 
U.  S.  A. 

Gentlemen : 

We  have  your  letter  of  2nd  instant.  We  ourselves  felt  that 
this  matter  was  being  unduly  prolonged  and  wrote  Mr.  Garcia 
that  he  must  make  efforts  to  close  it  up  without  delay. 

He  professed  to  be  very  much  surprised  that  we  should  press 
him  to  complete  as  he  was  arranging-  a  loan,  and  we  replied  that 
the  loan  should  be  put  through  without  delay.  We  are  writing 
him  again  on  the  subject.  Will  you  kindly  let  us  know  whether 
we  are  to  issue  action  against  Mr.  Garcia  if  he  fails  to  complete 
within  a  reasonable  time? 

Yours  faithfully, 

(Signed)    Charles  Wendall. 


Problem  136 
Wine  Shocks — Statement  of  Claims 

In  October,  1917,  a  large  New  York  bank,  which  was 
helping  to  effect  transactions  in  wine  shooks  between 
American  manufacturers  and  Argentine  wine  producers, 
received  a  request  for  an  offer  for  10,000  wine  barrel 
shooks,  52-54  gallon  capacity,  for  January  1918  shipment. 

A  quotation  was  obtained  from  the  Huggans,  Miller 
Cooperage  Company  of  Louisville,  Kentucky,  on  these 
barrel  shooks  for  $3.40  each,  f.  o.  b.  steamer  New  York. 
The  South  American  buyer  desired  C.  I.  F.  quotation, 
but  because  of  war  conditions  tlie  American  manufac- 
turer did  not  feel  justified  in  making  such  quotation. 
As  a  result,  the  offer  of  the  Iluggaus,  Miller  Cooper- 
age Company  was  accepted.     The  acceptance  was  made 


EXPORT    FINANCING    AND    CREDITS  627 

over  the  telephone  with  the  New  York  representative  of 
the  Huggans,  Miller  Company,  and  the  following  day  the 
bank  received  the  confirmation  reading : 

"Confirming  telephone  conversation  with  you  to-day  we  are 
entering  your  order  for  10,000  wine  barrel  shooks,  52-54  gallon 
capacity,  at  $3.40  each,  f.  o.  b.  steamer  New  York,  for  January 
shipment.  We  are  requesting  the  mill  to  set  these  shooks  up  big 
so  that  there  will  be  53  gallons  standup  if  at  all  possible," 

Shipment  was  made  within  the  dates  of  the  terms  set 
down  in  the  offer  and  acceptance. 

The  three  bills  of  lading  which  were  sent  forward  made 
note  of  the  fact  that  four  bundles  of  staves  were  missing, 
that  is,  staves  enough  for  thirteen  casks.  Further,  the 
bills  of  lading  stated  "staves  and  heads  black  stained." 
The  Huggans,  Miller  Company  explained  to  the  bank  that 
the  black  stain  noted  on  the  staves  was  not  actually  a 
stain,  but  was  due  to  the  fact  that  when  the  staves  were 
shaved  a  natural  stain  appeared.  This  dark  appearance 
of  the  wood  would  be  covered  up  when  the  hoops  were 
placed  around  the  staves.  » 

In  August,  1918,  the  New  York  bank  received  the  fol- 
lowing letter  from  its  branch : 

"The  wine  shooks  for  Messrs.  Martinez  e  Hijos,  which  have 
been  received  with  considerable  delay  on  account  of  the  trans- 
shipment in  Montevideo,  have  been  finally  delivered  to  the  ulti- 
mate buyer,  and  we  are  now  in  receipt  of  a  claim  from  our  cus- 
tomers in  connection  with  the  capacity  of  these  shooks,  which 
does  not  agree  with  the  capacity  on  the  basis  of  which  the  pur- 
chase has  been  made. 

"Hereunder  please  find  translation  of  the  letter  which  we  re- 
ceived from  Messrs.  Martinez  e  Hijos,  and  we  beg  to  enclose 
their  debit  note  for  $4,494.15  pesos  (paper)  which  you  will 
please  claim  from  Messrs.  Huggans,  Miller  Company,  to  com- 
plete the  terras  of  the  transaction : 

"  *We  have  received  a  letter  from  Mr.  Virgilio  Lopez, 
buyer  of  the  shooks,  which  we  paid  through  you  for  the 
firm  of  Huggans,  Miller  Cooperage  Company  from  the 
contents  of  which  j^ou  will  see  that  there  is  a  difference 
of  more  than  21/^  %  in  the  capacity  of  these  shooks, 
compared  with  the  capacity  indicated  by  us  before  the 
purchase  of  the  shooks,  and  which  was  the  basis  of  our 
sale  to  Mr.  Lopez. 


528    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

"  'On  account  of  this  difference,  the  exactness  of 
which  we  have  checked  ourselves,  we  have  had  to  reim- 
burse 45c  (Argentine  paper)  on  each  wine  shook.  This 
loss,  which  we  are  sustaining  on  account  of  the  failure 
of  the  sellers  to  comply  with  the  capacity  of  the 
shooks  ordered,  must  obviously  be  for  their  account, 
and  in  view  of  the  fact  that  your  bank  was  so  kind  as  to 
serve  as  intermediary  in  this  transaction,  we  herewith 
ask  you  to  kindly  do  what  is  necessary  in  order  to 
obtain  refund  of  the  above  charges  from  Messrs.  Hug- 
gans.  Miller  Company.' 

"We  further  have  received  from  Messrs.  Martinez  e  Hijos 
another  debit  note  for  the  amount  of  534  pesos  (paper),  value 
of  thirteen  wine  shooks  missing,  and  for  charges  paid  for  clean- 
ing the  shooks  oil  stained.  We  refer  in  this  connection  to  the 
clause  contained  in  the  bill  of  lading  to  the  effect  that  'staves 
and  heads  black  stained  and  four  bundles  short.'  " 

The  New  York  bank  sent  a  copy  of  this  letter  to  Hug- 
gans,  Miller  Cooperage  Company,  who  made  an  investi- 
gation of  their  original  records.  It  was  found  that  a 
record  of  the  test  of  this  specific  shipment  which  was  sent 
forward  showed  that  out  of  twenty  packages  only  one 
showed  a  capacity  of  less  than  52  gallons  and  this  one 
showed  a  capacity  of  51/^  gallons,  with  others  propor- 
tionately larger.  Further,  their  records  showed  that  the 
dark  stain  which  was  noted  on  the  bills  of  lading  was 
caused  by  a  natural  stain  which  appeared  when  the  staves 
were  shaved,  and  that  this  discoloration  was  covered  by 
the  hoops  when  the  casks  were  made  up. 

What  action  should  have  been  taken  by  the  Huggaiis, 
Miller  Cooperage  Company  upon  the  claim  of  the  South 
American  firm? 


EXPORT    FINANCING    AND    CREDITS  529 

Problem  137 
Grisby  and  Randall — Exportation  of  Coal 

The  building  of  the  Panama  Canal  greatly  reduced  the 
distance  from  eastern  ports  in  the  United  States  to  the 
west  coast  of  South  America,  so  that  the  west  coast 
countries  became  of  increased  importance  to  American 
exporters.  Previous  to  the  war  Great  Britain  controlled 
the  import  coal  trade  of  Chile,  mainly  because  England 
was  the  largest  purchaser  of  Chilean  nitrates  and  boats 
going  from  Liverpool  to  Chile  were  willing  to  carrj^ 
cargoes  of  coal.  Moreover,  competition  by  American 
coal  exporters  was  impossible  under  conditions  of  Amer- 
ican ocean  tonnage  then  existing.  At  the  outbreak  of 
the  war  Chile  was  forced  to  turn  to  the  United  States 
for  such  coal  as  was  formerly  imported  from  Great 
Britain. 

For  years  Chile  has  been  the  largest  coal  producing 
country  in  South  America,  but  the  product  is  very  soft 
and  is  considered  to  be  about  20%  inferior  to  good 
British  or  American  coal.  Whereas  the  average  tonnage 
for  the  past  ten  years  produced  by  Chilean  mines  has 
been  1,250,000  tons  annually,  the  coal  requirements  of 
Chile  were  estimated  in  1915  at  approximately  2,500,000 
metric  tons  per  annum.  In  1917  the  imports  of  coal  from 
the  United  States  amounted  to  approximately  290,000 
tons,  and  in  1918  to  about  250,000  tons. 

During  1918,  the  brokerage  firm  of  Grisby  &  Randall 
sold  to  the  Chilean  Coal  Company  several  large  ship- 
ments of  coal  for  coal  mining  companies  in  the  United 
States.  On  August  28,  1919,  Grisby  &  Randall  received 
the  following  cable  from  a  South  American  firm : — 

"GET  US  AN  OFFER  THREE  TO  FIVE  THOU- 
SAND TONS  WESTMORELAND  SCREEN  GAS 
COAL  AND  STEAM  COAL  GIF  VALPARAISO 
SEPTEMBER  OCTOBER." 

The  Westmoreland  coal  referred  to  is  that  coming  from 
Westmoreland  County,  West  Virginia. 


530    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

To  this  cable  the  following  answer  was  made : 

"WESTMORELAND  NOT  AVAILABLE  OFFER 
GOOD  SCREEN  LUMPED  GAS  COAL  ANALYZ- 
ING APPROXIMATELY  THIRTY  FIVE  PER- 
CENT VOLATILE  FIFTY  EIGHT  PERCENT 
CARBON  SIX  PERCENT  ASH  NINE  TENTHS 
PERCENT  SULPHUR  SIX  DOLLARS  AND  A 
HALF  GROSS  TON  AT  ATLANTIC  PORT  STEAM 
COAL  VOLATILE  THIRTY  FIVE  PERCENT 
LOW  ASH  APPROXIMATELY  ONE  PERCENT 
SULPHUR  THIRTY  FOUR  DOLLARS  GROSS  TON 
CIF  VALPARAISO  CONFIRMATION  BY  SEP- 
TEMBER TEN  ALL  PRICES  RISING  SUPPLY 
LIMITED  OUR  COMMISSION  TWO   PERCENT." 

The  following  telegram  was  received  from  the  Chilean 
Coal  Company: 

"ACCEPT  PROMPT  CARGO  MAXIMUM  SIX 
THOUSAND  TONS  VOLATILE  STEAM  COAL  CIF 
VALPARAISO  THIRTY  FOUR  DOLLARS." 

The  Grisby  &  Randall  Company  had  received  this  offer 
for  high  volatile  steam  coal  from  the  Eastern  Coal  Prod- 
ucts Company  and  upon  acceptance  gave  orders  that 
coal  be  shipped  to  the  Atlantic  port,  to  be  sent  to  Val- 
paraiso. The  coal  went  forward  on  the  steamer 
"CUBA."  Documents  were  sent  forward  with  draft 
attached,  for  payment  upon  presentation.  The  vessel 
was  loaded  and  sailed  from  Newport  News,  Virginia. 
The  coal  was  classified  by  the  Tide  Water  Coal  Exchange, 
recognized  in  the  coal  trade  of  this  country  as  authori- 
tative, which  issued  the  following  statement  at  time  of 
loading : 

"THIS  IS  TO  CERTIFY  THAT  TWENTY  SEVEN 
HUNDRED  TEN  GROSS  TONS  OF  COAL  LOADED 
INTO  STEAMSHIP  CUBA  AT  THE  PIERS  OF 
THE  CHESAPEAKE  AND  OHIO  RAILROAD, 
NEWPORT  NEWS,  VIRGINIA,  CONSISTED  OF 
HIGH  VOLATILE  GAS  COAL  COMING  FROM 
MINES  LOCATED  IN  WEST  VIRGINIA,  UNITED 
STATES." 

On  November  17  the  Grisby  &  Randall  Company  re- 
ceived the  following  cable: 


EXPORT    FINANCING    AND    CREDITS  531 

"CUBA  ARRIVED  CARGO  EXTREMELY  BAD 
RECEIVERS  REFUSE  TO  ACCEPT  COAL  CAN- 
CEL BxVLANCE  CONTRACT" 

Some  days  later  a  letter  came  direct  from  the  Chilean 
Coal  Company  from  which  the  following  extracts  were 
taken : 

''The  steamer  .'CUBA'  has  now  arrived.  The  quality  of  the 
coal,  however,  is  beyond  description  and  the  receivers  absolutely 
refuse  to  pay  for  the  cargo  as  the  same  is  entirely  useless  to 
them.  We  have  bought,  and  also  sold  "steam  coal"  and  w^e  are 
sorry  that  we  have  not  received  what  we  have  bought.  In  fact, 
the  whole  cargo  consists  of  only  duff  and  the  receivers  who  have 
tried  to  burn  this  duff  could  not  hold  the  steam.  It  is  to  be 
deplored  that  there  has  been  paid  the  exorbitant  rate  of  freight 
now  ruling  for  such  inferior  stuff.  It  is  also  a  matter  of  regret 
that  the  Eastern  Coal  Products  Company  has  treated  this  first 
business  with  us  in  such  a  manner,  wdiich,  of  course,  renders 
further  business  impossible  in  case  they  do  not  indemnify  us. 

"We  ask  you  kindly  to  take  up  this  matter  with  the  shippers 
and  see  that  a  large  discount  is  allowed  us.  At  the  same  time  we 
confirm  oui"  cable  instructions  to  cancel  the  second  cargo,  as  we 
would  not  risk  another  cargo  of  this  sort. 

"During  the  past  few  months  we  have  received  fifteen  cargoes 
of  American  coals  from  the  Atlantic  Coal  Company,  which  have 
been  of  an  excellent  quality.  It  is  therefore  quite  incomprehen- 
sible to  us  that  any  firm  could  load  such  an  inferior  coal  as  the 
above.  In  fact,  Atlantic  coals  have  been  described  by  many  of 
our  customers  as  the  best  coals  they  have  ever  seen  and  used. 

"According  to  a  moderate  estimate  we  shall  have  to  allow 
$3.00  per  ton  on  the  whole  cargo,  and  this  amount  we  hereby 
claim  refunded  from  the  shippers.  Indirectly  we  lose  much 
more  as  it  will  be  very  difficult  for  us  now  to  go  to  the  same  peo- 
ple and  ask  them  to  buy  American  coals." 

At  the  time  a  friend  of  one  of  the  members  of  the  firm 
of  Grisby  &  Eandall  was  in  Sontli  America,  and  upon 
cable  advices  went  to  Valparaiso.  lie  Avas  not  in  the  coal 
business,  but  Grisby  &  Randall  felt  that  he  might  be  of 
some  help  while  on  the  scene.  The  following  is  an  ex- 
tract from  a  letter  sent  to  him  by  the  manager  of  the 
home  office  regarding  this  shipment  of  coal: 

"In  regard  to  the  Chilean  Coal  Company's  claim  that  the 
cargo  is  extremely  bad,  we  believe  their  statement  is  not  well- 


532    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

founded.  The  coal  shipped  in  the  'CUBA'  consisted  of  coal 
classified  by  the  Tide  Water  Coal  Exchange  as  Pool  No.  5, 
which  is  a  high  volatile  gas  coal  that  can  be  used  equally  well 
for  steam  or  bj^-produet  purposes.  This  grade  is  widely  sought 
for  and  given  preference  to  by  consumers  in  this  country.  I, 
personally,  know  it  to  be  of  excellent  quality  and  know  that  it 
was  classified  by  the  Tide  Water  Coal  Exchange  as  Pool  No. 
5,  a  grade  established  by  the  Exchange,  and  the  Eastern  Coal 
Products  Company  therefore  had  no  interest  or  power  to  deter- 
mine this  high  quality. 

"The  Chilean  Company  purchased  high  volatile  steam  coal, 
which  is  classified  as  Pool  No.  5.  The  Tide  Water  Coal  Ex- 
change's classifications  are : — 

Pool  No.   5 — run   of  mine  gas  coal. 
Pool  No.  6 — high  volatile  steam. 
Pool  No.  7— high  volatile  by-products. 

"All  Pool  No.  5  can  be  used  as  Pool  No.  6,  but  Pool  No.  6 
cannot  be  used  as  Pool  No.  5.  All  mines  listed  as  Pool  No.  5 
are  permitted  to  ship  to  Pool  No.  7,  and  vice  versa ;  but  mines 
listed  as  Pool  No.  6  cannot  ship  to  Pools  Nos.  5  or  7. 

"If  you  look  at  the  foregoing  extract  from  the  Tide  Water 
Coal  Exchange  rules  you  will  see,  without  a  doubt,  that  coal 
of  a  better  grade  than  contracted  for  was  actually  shipped. 

"We  have  received  advices  that  the  draft  on  the  Chilean 
Coal  Company  has  been  paid.  In  the  beginning  we  placed  this 
company's  name  before  the  Eastern  Coal  Products  Company 
with  our  stamp  of  approval.  To  have  the  Chilean  Coal  Com- 
pany make  such  claims  gives  the  Eastern  Coal  Products  Com- 
pany cause  to  feel  that  our  approval  does  not  mean  much. 

"We  believe  that  the  Eastern  Coal  Products  Company  did 
an  excellent  favor  for  the  Chilean  Company  in  loading  the 
grade  they  shipped,  considering  which  the  Chilean  Company 
statements  convey  the  impression  of  one  ever  on  the  alert  for 
an  opportunity  to  take  an  undue  advantage. ' ' 

The  representative  of  the  brokerage  firm  in  Valparaiso 
sent  the  following  letter : 

"On  receipt  of  your  reply  of  December  7,  I  went  to  Valpa- 
raiso to  investigate  this  case.  I  spent  the  9th  and  10th  there, 
and  am  now  back  in  Santiago. 

"Speaking  as  a  layman,  I  should  say  that  this  cargo  was 
really  bad,  as  I  had  an  opportunity  to  see  the  coal  at  the  gas 
works'  coal  yard,  where  the  gas  works'  superintendent  showed  me 
a  pile  ol;  about  200  tons  of  the  coal  from  the  '  CUBA. '  There  were 
very  few  big  pieces  and  the  coal  was  mostly  fine  grain  coal,  almost 


EXPORT    FINANCING    AND    CREDITS  533 

as  fine  as  dust  or  mold.  To  the  gas  works  it  was  immaterial 
that  the  gas  coal  was  so  fine  grained  because  they  crush  the  coal 
anyhow  before  it  is  used  in  the  retorts.  The  superintendent 
mentioned  that  these  coals  were  ^inferior  to  the  coals  they  had 
rceived  from  the  Atlantic  Company. 

' '  The  coal  in  the  bottom  of  the  ship  had  looked  quite  different 
from  the  coal  on  top  and  there  w^ere  many  rather  big  pieces 
in  the  bottom.  If  the  whole  cargo  had  looked  as  did  the  one- 
third  in  the  bottom,  the  Chilean  Company  would  not  have  any 
reclamations.  The  thing  which  made  the  management  here 
wonder  what  had  been  put  into  the  steamer  was  that  the  cap- 
tain said  that  one-third  of  the  coal  was  gotten  very  quickly  at 
the  point  of  loading  but  they  had  to  wait  some  time  for  the  rest. 
The  management  thought  they  had  gotten  a  lot  of  inferior  rem- 
nants in  order  to  get  the  steamer  filled. 

"This  cargo  had  been  sold  in  advance  to  a  number  of  indus- 
tries and  to  a  railroad  as  the  cargo  was  to  be  steam  coal.  The 
previous  American  coal  cargoes  had  been  excellent.  The  rail- 
road had  agreed  to  have  all  their  locomotives  use  the  coal  from 
the  'CUBA'  for  a  few  days  in  order  to  show  the  directors  of 
the  road  the  excellency  of  the  American  coals  and  the  economy 
through  using  them.  These  tests  had  to  be  inhibited  when  the 
'CUBA'  arrived  with  what  they  call  a  sample  of  the  Ameri- 
can Motherland. 

' '  The  Chilean  Coal  Company  gave  me  the  enclosed  list  of  rec- 
lamations made  on  776  tons,  on  which  they  calculate  that  they 
will  lose  profits  amounting  to  about  $3,250.  I  must  say  that 
they  have  made  a  profit  out  of  the  cargo  just  the  same,  although 
not  so  big  as  calculated,  and  therefore  a  recompensation  is  not 
really  needed  for  economic  reasons,  but  they  really  had  a  lot  of 
discomfort  on  account  of  all  the  complaints  about  the  coal." 

In  the  light  of  this  correspondence  what  action  should 
have  been  taken  by  the  firm  of  Grisby  &  Eandall  to  best 
serve  the  interests  of  their  clients? 


534    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Addenda  1    (see  page  462) : 

**The  following  is  a  typical  form  of  foreign  draft  which  is  accepted  by 
writing  across  the  face:  (a)  the  word  accepted,  (b)  the  date  and  (c)  the 
signature  of  the  acceptor. 


r 


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,4 

'u 


f  W 


■'> '/.  ■/  •■!!.  vy ) .  /  ^  .  / '  -<'-  // '/// 


■i^ 


FORM     16.     Garfield    Talking    Machine    Company — Foreign 

Drafts 


EXPORT  FINANCING  AND  CREDITS 


535 


Addenda  1,  Continued. 


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536    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Addenda  1,  Continued: 


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EXPORT    FINANCING    AND    CREDITS  537 

Addenda  1,  Continued: 

Upon  acceptances,  consult  Mathewson,  Acceptances:  Trade  and  Bankers; 
and  the  numerous  publications  of  banks  and  of  the  American  Acceptance 
Council.  According  to  Dewey  and  Shugrue,  Banlcing  and  Credit,  pages  374 
and  375,  foreign  bills  of  exchange  may  be  classified  as  follows: 

"1.  As  to  maturity : 

(a)  Demand  or  siglit  bills  or  bankers'  checks — payable  immediately 
on  presentation. 

(b)  Short  bills — payable  within  a  month  from  time  of  acceptance. 

(c)  Long  bills — payable  after  a  month  from  time  of  acceptance. 

2.  As  to  whether  drawn  payable  after  sight  or  after  date : 

(a)  Drawn   payable   so   many   days   after   sight,    that   is,    after   ac- 
ceptance. 

(b)  Drawn  payable  so  many  days  after  date  (not  common  in  foreign 
exchange). 

3.  As  to  domicile: 

(a)  Sterling    drafts,    also    called    'sterling    exchange '—payable    in 
pounds  in  England. 

(b)  Franc  drafts — payable  in  francs  in  France. 

(c)  Dollar  drafts,   also   called   'dollar   exchange',   or   'dollar   accep- 
tances'— payable  in  dollars  in  United  States. 

(d)  Bills  on  other  countries. 

4.  As  to  whether  bearing  collateral  security  or  not: 

(a)  Documentary  bills — having  attached  bills   of  lading  and   other 
shipping  papers. 

(b)  Clean  bills — with  no  documents  attached. 

5.  As  to  parties  to  instrument: 

(a)  Bankers '  bills,   bankers '  drafts   or  bankers '   checks — drawn   by 
one  bank  against  another. 

(b)  Commercial  bills — drawn   by  a   merchant  against  another   mer- 
chant or  the  latter 's  bank. 

6.  As  to  nature  of  transaction: 

(a)  Grain  bills. 

(b)  Cotton  bills. 

(c)  Finance  bills — drawn  for  purpose  of  borrowing  funds  in  foreign 
money  markets. ' ' 


538    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Addenda  2   (see  page  495) : 


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OPEN  ACCOl'NT                                               GENERAL 
A      DiscoonLs.                                                           N.     Account  settled  by  attorney.  . 
B      Pays  when  due.                                                  0.     Account  settled  by  arbitralint 
C.     Slow                                                                                    or  compromise. 

P.     Account  still  in  dispute 

DRAFTS                                                   WE  RATE  THE  ACCOUNT 

IH.     Anticipates  payment.                                         P.     High, 

'1.      Accepts  and  pays  promptly.                             R-     Good. 

J.      Accepts  promptly-delays  payment                   S.      Satisfactory. 

L.      Delays  froth  acceptance  and  payment.            T.     Unsatisfactory 

M.    Makes  unjust  claims.                                         U.     Undesirable, 

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EXPORT    FINANCING    AND    CREDITS  539 

Addenda  S,    Continued: 


Foreign  Credit  Interchange  Bureau 

NATIONAL  ASSOCUTION  OF  CBEDIT  MBN 

tl  PA«  BOW  NIW  tOB«,  N.  Y. 


tag.  No- 
Name  


SlTMt  Addn 
City 


-Country. 


SUBSCRIBER'S  INQUIRY  TICKET 

Foreign  Credit  InterokaB^e  Bnreaa 

National  Association  of  Credit  Mbn 
•I  PA«i  mow  Niw  you.  H  t 


Biutneu- 
Sfrett 


-Civ- 


CouotcjE— 


Reason  for  makint  inquiry.      [Check]     Old  Acct  [       )     New  Order  [       )     Inquiry  (       ] 


GIVE  YOUR  EXPERIENCE: 


..?,x. 


Give  below  reference,  or  name,  of  house,  which  yOu  beheve  ,o  be  intere.ted  (with  eomplet.  .dd,«..) 


SubKriber'i  No.. 


FORM  20.    Whitmore  Rubber  Company— Request  of  Bureau 
to  Members 


540    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Addenda  2,   Continued: 


EXPORT    FINANCING    AND    CREDITS 

Addenda  2,   Continued: 


FOREIGN  CREDIT  INTERCHANGE  BUREAU 

National  Association  of  Credit  Men 


Ne»    York.   N.   Y. 


Aldiou^  oblkiawi  I 


1.     Report  oi 
'2     Address_ 


3.    Classes  of  goods 

4     Languajjes  uf  correspondence 

5,    Character  of  business:  WhoIesaler_ 
Manufacturer Importer, 


6.  Buys  chiefly;    Domestic. 

7.  Organization.^ 


,  Exporte 


Commission  Merchant  _ 

_Agent .Forwarde 


_  Foreign  _ 


8-     Branch  houses_ 


Financial  reference. 


10.    Capital 

U      Date  of  report. 


-Volume  of  business. 


_No.  of  employe 


12.    Managers  or  partners  {name,  title,  age,  nationality). 


13.    Capital  stock  controlled  by  (name,  address,  nationalil 


13.    Relative  size  of  concern     Very  large. 
16.    General  reputation  of  concern 


DlUFFLEMESffAEY  BE)P©MT 


541 


FORM     22.     Whitmore    Rubber    Company  —  Supplementary 

Report 


642    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Addenda  3  (see  page  500)  : 

*See  Dewey  and  Shugrue,  Banking  and  Credit,  Cliap.  V;  National  City 
Bank,  Cammcrcial  Letters  of  Credit,  by  John  E.  Gardin;  proceedings  of 
National  Foreign  Trade  Council  for  1920,  p.  360 — "A  Standard  Ameri- 
can Letter  of  Credit  by  Marc  M.  Michael;  and  Export  Trade  and  Exporters' 
Review  for  Dec.  31,  1921 — "Latin  American  Laws  on  Letters  of  Credit." 

Because  of  the  frequent  misunderstiindings  and  disputes  which  occurred 
particularly  during  the  period  of  falling  prices  in  1920  and  1921,  there 
has  developed  a  demand  for  standardization  of  export  documents,  espe- 
cially those  involving  financial  obligations.  A  committee  of  bankers,  work- 
ing with  the  American  Acce^jtance  Council,  has  endeavored  to  standardize 
forms  for  letters  of  credit.  They  recommend  the  discontinuance  of  the 
so-called  "authority  to  purchase,"  which  had  very  few  of  the  elements 
of  a  letter  of  credit,  and  recommend  an  unconfirmed  credit  which  they 
call  "authority  to  pay:" 

Advice  No.  A 

19 

("ty) 


Dear  Sirs : 

We   advise   you    that Bank    have    authorized    us    to 

(correspondent  bank) 

honor  your  drafts  for  account  of 

for  a  sum  or  sums  not  exceeding  a  total  of (figures) 

(words)   on  us  at to  be  accompanied  by 

evidencing  shipment  of 

insurance   to   be   effected   by 

All  drafts  so  drawn  must  be  marked : 

' '  Drawn  as  per Bank  's 

(advising  bank) 

Advice  No.  A ,  dated 19 " 

Drafts  so  drawn,   with   documents   as   specified   must   be'  presented   at 
our  office  not  later  than 19 

The  authority  given  to  us  is  subject  to  revocation  or  modification  at 
any  time  without  notice  to  you. 

Each  of  the  provisions  on  the  back  hereof,  except  so  far  as  otherwise 
exj^ressly  stated,  is  incorporated  as  part  of  this  advice. 

This    advice    conveys    no    engagement    on    our    part    or    on    the    part    of 

Bank  and  is  simply  for  your  guidance  in  preparing 

(correspondent  bank) 

and  presenting  drafts  and  documents. 

Yours  very  truly, 


EXPORT    FINANCING    AND    CREDITS  543 

Addenda  3,  Continued  : 

Irrevocable  credits  gUcaranteed  only  by  the  issuing  bank — that  is,  in  the 
case  of  exporters,  the  foreign  bank  or  foreign  correspondent  of  the  Ameri- 
can bank — taice  the  following  form: 


Credit  No.  B. 
(city) 


.19. 


Dear  Sirs : 

We    hereby    ojjcu    our    irrevocable    credit    in    your    favor    for    account 

of for  a  sum  or  sums  not  exceeding  a  total 

of (figures) (words) 

available  by  your  drafts  on _ 

at to  be  accompanied  by 

evidencing  shipment  of: 

insurance    to    be    effected    by 

All  drafts  so  drawn  must  be  marked : 

' '  Drawn  under Bank 

(issuing   bank) 

Credit  No.  B :,  dated 19 " 

(To  be  used  when  not  all  the  documents  are  to  accompany  draft) 
There  must  be  forwarded  by  early  mail  to Bank 

at the  following  documents 

All  remaining  documents  must  accompany  the  draft. 

The  amount  of  any  draft  drawn  under  this  credit  must,  concurrently 
with  negotiation,  be  endorsed  on  the  reverse  hereof,  and  the  presentment 
of  any  such  draft  shall  be  a  warranty  by  the  negotiating  bank  that  such 
endorsement  has  been  made  and  that  documents  have  been  forwarded  as 
herein  required. 

This  credit  must  accompany  any  draft  which  exhausts  the  credit  and 
must  be  surrendered  concurrently  with  the  payment  of  such  draft. 

Each  of  the  provisions  on  the  back  hereof,  except  so  far  as  otherwise 
expressly  stated,  is  incorporated  as  part  of  this  credit. 

We  hereby  agree  with  the  drawers,  endorsers  and  bona  fide  holders  of 
drafts  drawn  under  and  in  compliance  with  the  terms  of  this  credit  that 
the  same  shall  be  duly  honored  on  due  presentation,  and  delivery  of  docu- 
ments as  specified  at _ if  negotiated  on  or 

before 19 

Yours  very  truly. 


544    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Addenda  3,  Continued: 

Where   the   irrevocable  credit  is   coufirmed   also   by   the   paying   bank,   the 
following  form  is  used : 

Credit  No.  Da 

19    ..  .. 

("ty) 


Dear  Sirs: 

"VVe  are  instructed  by Bank  to  advise  you  that 

they   have   opened   their   irrevocable   credit   in   your   favor    for   account   of 

for  a  sum  or  sums  not  exceeding  a  total 

of (figures) (words) 

available  by  your  drafts  on  us  at 

to  be  accompanied  by 

evidencing   shipment    of.... 

insurance   to    be    effected    by 

All  drafts  drawn  under  the  credit  must  be  marked: 

' '  Drawn  under Bank  's 

(advising  bank) 

Credit  No.  D-a ,  dated 19 " 

Each  of  the  provisions  on  the  back  hereof,   except  so   far  as  otherwise 
expressly  stated,  is  incorporated  as  part  of  this  credit. 

Bank  engaged  with  you  that  all  drafts  drawn 

(correspondent  bank) 

under  and  in  compliance  with  the  terms  of  this  credit  will  be  duly  honored 

on   delivery   of   documents   as   specified,   if   presented   at   this   office   on   or 

before 19 ;    we   confirm    the   credit   and 

thereby  undertake  that  all  drafts  drawn  and  presented  as  above  specified 

will  be  duly  honored  by  us. 

Yours  very  truly, 

Tlie  reverse  of  all  these  forms  is  as  follows: 

"Provisions   for   Interpretation   of   Credits. 

A.  (1)    Eailroad     export    and    forwarders'     bills    of    lading    will    not    be 

accepted. 

(2)    Ocean  Ijills  of  lading  permitting  transliipmeut  will  be  accepted. 

B.  (1)   Bills  of  lading  sliall  contain  no  words  cjualifying  the  acceptance  of 

shipments  in  apparent  good  order  and  condition. 

(2)  'Received  for  shipment'  or  'alongside'  bills  of  lading  Avill  be 
accepted  and  the  date  thereof  taken  to  be  the  date  of  shipment, 
and  in  this  case  insurance  shall  cover  the  shipment  from  such 
date  of  shipment  and  on  wlmtever  vessels  carried. 


EXPORT    FINANCING    AND    CREDITS  54S 

Addenda  3,  Continued: 

will  be  token  as  the  date  wL'f  stl'f^  *''  ""!''  ''  '''^'''^  ^^'^ 
evidenced  by  'on  board 'end  nrl  ^  shipment  was  effected;  if 
be  so  taken  endorsement,  the  endorsement  date  will 

'■  ^'mZZ  ':r^::Z.t'''  '^  ^^-^^^-^^  -  -^^^^^-^  underwriters-  cer- 

"•  "-^^S.rt:rt;;r^;:^ts£^d^:2^^VVP  -^^  there 

'"'^c^JV'^S!?  :i'l:^i:[!i:J-^:^^^f!>^^  or  negotiation  falls 
next  succeeding  business  day   ^'  "-^Pi^^^t^O"  is  extended  to  the 

Presentation  must  be  n.ade  during  the  usual  banking  hours. 

'':h^:::;c'^^^^^:;rs.;i;^tsnT^^^p^^^^^^ 

ing  shipment  to  be  effeSwiS  .,•'.''".  ^'  interpreted  as  requir- 
presentition  or  negotiation  i!!..  ]'*^,^''^''  ^"^  '^  "«  *i'^te  for 
tion  nuzst  be  nual^^" mT  t lir  f d1;s"ff  "^'r^'^''^-  -  -egotia- 
or   advice.  -^    '^''^^  ^^o"^  the  date  of  the  Credit 

I.  Documents   representing   more   thnn    tI,P   .       ■«  ^     - 

may  be  accepted  in  fhe  discre h'on  of  H?p"^  ^"''''*'*>'  °^  P^oP^'-tJ 
without  thereby  binding  he  buver  to  ^  ^F'"^  "'  negotiating  bank 
^^Pa^ment    shall   ^e  !i^.i?enr^^-;^r  ^  -^-^-^^^ro? 

'•    "^cSuiS^rpS^rVlS,;^  -^^«  «S^^-^^-  ^-P-t,  shall 
from  the  named'sum  or  quanSy  ^^^^^^^"^g  ten  per  centum 

K.  Drafts  drawn  without  recourse  will  not  be  honored. 

and   Importers   A^Satfon  '  a^Sr   of  crm'n^^   ^""T'-^f    ^-^1'°^*-^ 
New  York,  New  York  Prodm^o  ^v  »  Commerce   of  the   State   of 

elation   of   New   York.t    .       %        ''"""^^  ''"^   the  Merchants'  Asso- 
York,  on  December  16,   1919. ''""'''   '^''^    "^    ^"^"^    Ho"«e,    N^w 


F. 

G. 

H. 


CHAPTER  XI 


DELIVERY  OF  EXPORT  ORDERS 

MUCH  of  the  mystery  of  foreign  trade  has  been 
connected  with  the  delivery  of  goods,  because  so 
many  complex  documents  constituting  the  ' '  paper 
work"  must  be  executed  in  connection  with  shipment  of 
export  orders  in  order  to  carry  out  the  various  plans 
and  policies  relating  to  financing  and  the  physical  de- 
livery of  goods  as  the  result  of  selling  transactions  in 
foreign  lands.  As  a  consequence,  a  great  deal  of  the 
earlier  study  of  foreign  trade  has  related  primarily 
to  the  so-called  ''technique,"  in  this  case  meaning  par- 
ticularly the  routine  in  connection  with  the  delivery  of 
an  order.  That  the  proper  filling  of  orders  is  necessary 
to  continued  foreign  trade  is  a  statement  that  arouses 
no  argument,  for  no.  concern  can  fill  orders  improperly 
without  added  expense  caused  by  delay  and  without 
arousing  the  ill-will  of  its  customers.  For  that  matter, 
one  can  do  so  no  more  in  the  domestic  market.  But  to 
look  upon  the  ''paper  work"  as  the  substance  of  foreign 
trade  and  foreign  experience  is  an  entirely  different  view- 
point. That  greater  care  is  necessary  in  filling  foreign 
than  domestic  orders,  because  of  the  difficulty  of  adjust- 
ments, distance,  and  other  factors,  is  also  freely  admitted ; 
but,  once  an  exporter  has  carefully  studied  his  problem 
and  decided  upon  a  practice,  the  filling  of  export  orders 
should  become  a  routine  just  as  the  filling  of  domestic 
orders  has  become  a  routine  requiring  comparatively  lit- 
tle attention  on  the  part  of  department  executives. 
Nevertheless,  at  the  outset  the  export  manager  must  de- 
termine currently  policies  with  reference  to  the  various 
phases  of  shipment  and  must  so  arrange  his  organization 

54^6 


DELIVERY    OF    EXPORT    ORDERS  547 

that  the  physical  delivery  of  goods  will  add  to  rather  than 
detract  from  the  good-will  which  he  is  trying  to  build 
up  as  a  basis  for  continued  foreign  trade. 

The  exporting  manufacturer,  who  receives  an  order 
from  a  foreign  customer  either  by  mail  or  through  his 
salesmen,  must,  arrange  for  the  proper  performance  of 
the  following  operations;     (1)   decide  upon  acceptance 
of  the  order  on  the  basis  of  credits,  his  ability  to  fill  the 
order,  and  other  considerations;    (2)    acknowledge  the 
order— the  acknowledgment  of  orders  in  foreign  trade 
is  the  general  custom  and  for  many  exporters   offers 
an  opportunity  to  inject  a  personal  touch  and  a  state- 
ment  of  appreciation   of  the   order;    (3)    prepare   the 
goods   for   shipment— this   includes   recognition   of   all 
the  desires  of  the  customer  with  regard  to  packing  and 
containers  and  a  knowledge  of  how  to  pack  the  goods 
so  that  they  will  arrive  in  good  condition  and  pass  the 
customs    most    economically;     (4)     secure    insurance, 
whether  of  the  types  desired  by  the  customer  or  of  the 
types  intended  by  the  quotation;  (5)  shipping  of  goods— 
in  the  case  of  inland  shipments,  they  will  be  turned  over 
to  the  railroad  company  and  bill  of  lading  received;  in 
the  case  of  port  shipments,  they  will  be  placed  in  the 
custody  of  the  steamship  company  and  bill  of  lading  will 
finally  be  given  as  evidence  of  their  receipt;  the  for- 
warder, steamship  company,  or  exporter  must  likewise 
secure  consular  invoices;  (6)  entering  goods  at  the  cus- 
toms house— that  is,  an  export  declaration  must  be  fur- 
nished to  show  an  exportation  of  goods  for  governmental 
records;  (7)  the  invoice  must  be  prepared  and  the  draft 
upon  the  foreign  customer  drawn,  together  with  the  bill 
of  charges  not  included  in  the  invoice  amount;  (8)  in- 
voice, draft,  and  bill  of  charges  are  attached  to  the  bill 
of  lading  and  insurance  certificate  or  policy  and  the 
documents  may  be  negotiated  at  the  bank ;  this  negotia- 
tion may  consist  in  a  presentation  for  collection  or  in 
a  discounting  of  the  draft;  (9)  the  exporter  mails  ad- 
vice of  shipment  to  his  customer.    After  collection  has 
been  made,  the  transaction  is  complete. 


518     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  course  of  an  export  order  in  a  merchant  or  com- 
mission house  varies   somewhat  in  the  earlier   stages: 

(1)  The  exporter  receives  an  inquiry  from  the  customer 
abroad  as  to  price  and  conditions  under  which  the  de- 
sired goods  are  procurable.  (2)  The  exporter  receives 
quotations  and  reference  samples  from,  one  or  more 
manufacturers.  If  the  goods  desired  are  to  be  of  spe- 
cial make  or  brand,  only  the  original  manufacturer  or 
sole  vendor  will  be  communicated  with.  (3)  The  ex- 
porter obtains  whatever  additional  quotations — freight, 
insurauce,  exchange,  etc. — he  may  need  for  the  compila- 
tion of  selling  price.  (4)  The  exporter  transmits  his 
offer  to  the  foreign  inquirer.  In  case  he  works  on  com- 
mission only,  the  original  manufacturer's  price  will  be 
transmitted.  (5)  The  exporter  receives  his  order  from 
the  customer.  (6)  The  exporter  places  the  order  with  the 
maker.  (7)  The  goods  reach  the  place  of  export  or  the 
forwarding  agent  for  shipment.  (8)  The  succeeding  steps 
are  precisely  the  same  for  the  export  merchant  as  for 
the  manufacturer  who  receives  his  order  direct  from  the 
foreign  customer. 

The  exporting  manufacturer  may  shift  to  other  agen- 
cies a  number  of  the  acts  which  must  be  performed  in 
order  to  deliver  his  export  order  promptly.  The  extent 
to  which  he  will  do  this  will  depend  partly  upon  his  loca- 
tion, partly  upon  the  size  of  his  organization,  and  partly 
upon  his  general  attitude  toward  export  trade.  The 
manufacturer  must  himself  decide  upon  the  acceptance 
of  the  order  and  the  extent  of  credit,  although  he  may 
secure  credit  insurance.  The  manufacturer  cannot  shift 
the  acknowledgment  of  the  order  to  some  other  agency, 
but  he  may  turn  the  goods  over  to  a  commission  house 
or  a  forwarder  to  be  packed — ordinarily,  however,  this 
is  not  done.  The  shifting  of  functions  occurs  after  the 
goods  have  been  prepared  for  shipment  and  have  been 
shipped  by  rail  or  turned  over  to  the  forwarder  at  the 
port  of  shipment.  The  forwarder  may  secure  insurance, 
he  will  provide  for  the  consulation  of  invoices,  for  the 


DELIVERY    OF    EXPORT    ORDERS  549 

customs  declaration,  and  will  even  provide  for  the  draft 
and  bill  of  charges.  It  is  evident  that  the  negotiation  of 
documents  constitutes  likewise  shifting  to  banks  of  the 
responsibility  of  collection  and  sometimes  of  financing. 
From  the  view-point  of  the  individual  manufacturer 
the  questions  which  arise  outside  of  the  many  detailed 
questions  with  regard  to  the  particular  documents, 
which  become  a  matter  of  routine  when  once  learned, 
may  be  summarized  by  the  following  outline: 

A.  Relation  of  Filling  of  Orders  and  Delivery  of  Goods  to 

Export  Selling. 

Should  the  filling  of  orders  and  delivery  of  goods  be  con- 
sidered functions  of  the  export  department?  If  not,  how 
should  the  proper  coordination  between  the  shipping,  bill- 
ing, and  export  departments  be  made  in  order  that  mistakes 
destructive  of  good-will  shall  not  be  of  abnormal  frequency  ? 

To  what  extent  should  technical  knowledge  of  filling  and 
delivery  of  export  orders  be  considered  satisfactory  equip- 
ment for  the  personnel  of  the  export  department? 

Are  special  plant  and  equipment  necessary  for  the  filling 
of  orders  and  equipment  for  delivery  of  goods  on  export 
orders  ? 

B.  Handling  of  Export  Orders. 

What  routine  is  required  for  the  handling  of  orders? 

Is  it  possible  to  establish  a  standard  practice  in  the  han- 
dling of  export  orders? 

Should  stocks  of  finished  goods  be  carried  at  other  points 
than  the  factory,  in  order  to  provide  for  prompt  shipment 
of  goods  on  export  orders?  What  type  of  warehousing 
facilities  should  be  used  for  such  a  purpose? 

Under  what  conditions  is  it  wise  to  utilize  forwarders  m 
the  shipment  of  export  orders? 


550    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  138 
The   Export   Shoe   Company — Handling   Orders* 

The  Export  Shoe  Company  manufactures  a  line  of 
high-grade  shoes,  which  it  distributes  in  domestic  and 
foreign  markets  through  exclusive  agencies.  It  has  built 
up  a  very  desirable  chain  of  exclusive  agencies  abroad, 
but  in  more  recent  times  has  found  the  changes  among 
agents  rather  more  numerous  than  are  desirable.  Careful 
examination  of  the  causes  for  severance  of  connections 
with  several  important  agencies  revealed  that  the  diffi- 
culty lay  not  in  the  quality  of  the  shoe  or  the  salability 
of  the  product,  but  rather  in  the  difficulty  of  agents 
securing  the  type  of  service  and  delivery  to  which  they 
thought  they  were  entitled.  Although  the  company  in 
every  case  had  attempted  to  make  good  any  losses 
incurred  through  mistakes  in  packing  and  shipping,  the 
officials  began  to  realize  that  remedying  of  errors  was 
not  so  satisfactory  in  cementing  the  relationships  with 
agencies  as  the  prevention  of  mistakes.  It  was  found 
that  in  some  of  the  shipments  delay  was  due  to  the  fact 
that  insurance  was  not  provided  in  time  to  allow  the 
order  to  be  shipped  on  the  specified  boat;  in  other  cases, 
the  production  department  had  not  finished  the  shoes  in 
time ;  in  still  other  cases,  the  goods  had  not  been  packed 
properly. 

The  organization  of  the  company  was  briefly  as  fol- 
lows. Under  the  president  and  managing  director  were 
the  vice-president  and  secretary  of  the  corporation,  the 
factory  superintendent,  the  merchandise  manager,  and 
the  sales  manager.  The  export  manager,  credit  man- 
ager, and  advertising  manager  were  coordinate  in  posi- 
tion and  reported  to  the  sales  manager.  Packing  and 
shipping  were  under  the  control  of  the  merchandise 
manager,  to  whom  the  traffic  manager  reported.  The 
operations  in  the  delivery  of  an  export  order  were  per- 
formed by  tlie  various  departments  and  sub-departments 
as  follows.    The  export  manager  received  the  order  and 

*See  pages  001  through  6^8,  Addenda  1, 


DELIVERY    OF    EXPORT    ORDERS  551 

passed  upon  the  credits.  The  production  department 
prepared  the  production  order  and  attended  to  mak- 
ing the  shoes.  The  traffic  manager  provided  for  securing 
the  steamship  space,  for  insurance,  and  secured  the  bill 
of  lading.  The  shipping  clerk  provided  for  the  pack- 
ing and  cartage  to  the  dock  and  secured  the  dock  receipt. 
The  export  department  then  looked  after  the  invoicing 
and  bill  of  charges.  The  credit  department  took  the  papers 
and  negotiated  the  draft.  It  was  customary  to  turn  the 
preparation  of  consular  invoice  and  certificates  of  origin 
over  to  the  steamship  company. 

The  problem  confronting  the  Export  Shoe  Company 
was  that  of  devising  some  sort  of  system  which  would 
cause  these  operations  to  be  performed  in  such  a  way 
that  the  goods  would  be  packed,  the  necessary  documents 
secured,  and  the  shipments  sent  off  on  schedule  time. 
The  desirable  system  would  be  to  have  the  goods  arrive 
at  the  packing  room  so  that  they  could  be  packed  and 
delivered  at  the  dock  a  day  or  two  before  the  shipping 
date.  The  invoice  should  be  ready  by  the  shipping  date, 
also  the  insurance  certificate.  The  draft  and  bill  of 
charges  should  be  added  on  the  day  of  sailing. 

How  should  the  Export  Shoe  Company  go  about  ar- 
ranging for  scheduling  of  operations  so  as  to  provide 
against  future  delays  because  of  failure  of  any  of  the 
departments  to  perform  their  operations  on  time? 


552    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  139 

MacLean   Company — Routing   of   Orders* 

The  MacLean  Paper  Company  has  been  faced  with  a 
number  of  difficulties  arising  from  the  handling  of  its 
foreign  orders.  When  an  order  for  export  is  received 
at  the  home  office  it  goes  through  the  following  routine : 

1.  Export  department  for  verifying  and  pricing. 

2.  Credit  department  for  rating. 

3.  Planning  department  for  manufacturing  schedule. 

4.  Shipping  department  for  packing. 

5.  Traffic  department  for  routing  and  making  out  bill 

of  lading. 

6.  Billing  department  for  bookkeeping  and  forward- 

ing of  papers. 

Under  this  arrangement  the  traffic  department  is  not 
informed  that  arrangements  are  being  made  until  the 
goods  are  actually  routed.  Consequently  shipments  to 
Australia  and  other  distant  points  are  sometimes  com- 
pelled to  wait  over  until  the  next  boat  a  month  or  so 
later,  because  the  goods  were  not  ready  when  the  boat 
sailed  and  no  space  had  been  engaged  to  permit  im- 
mediate shipment.  The  planning  department  has  fre- 
quently upset  its  usual  routine  to  hurry  through  an  order 
marked  "rush,"  only  to  find  when  the  goods  were 
finished  that  there  was  no  boat  available  for  three  weeks 
and  that  there  would  have  been  ample  time  to  have  com- 
pleted the  order  by  following  the  regular  schedule. 

The  order  of  the  export  department  with  its  terms  and 
prices  quoted  has  been  used  as  a  work  sheet  for  each  of 
the  other  departments  in  order  to  save  paper  work  and 
additional  system.  Consequently,  almost  every  one  in 
the  organization  knows  what  prices  have  been  quoted 
each  customer  and  there  has  been  some  trouble  from 
competitors  who  have  thereby  been  able  to  secure  this 

*For  general  references  upon  the  handling  of  orders,  cf.  Hough,  Prac- 
tical Exporting,  Chap.  XII;  Bacher,  Export  Technique,  (Business  Training 
Corp.),  Chap.  I;  Preciado,  Exporting  to  the  World,  Chap.  XIII;  Bureau  of 
Foreign  and  Domestic  Commerce,  Miscellaneous  Series  No.  81,  Selling  in 
Foreign  Markets,  Chap.  XIII;  and  Rosenthal,  Technical  Procedure  in 
Exporting  and  Importing,  Part  I, 


DELIVERY    OF    EXPORT    ORDERS  553 

knowledge.  Numerous  suggestions  have  been  made  to 
correct  this  e\dl,  but  each  plan  has  involved  a  compli- 
cated system  mth  much  additional  paper  work.  The 
following  system  of  routing  foreign  shipments  has  been 
proposed  by  the  export  manager  to  overcome  these  dif- 
ficulties : 

1.  The  Export  Department  passes  and  verifies  all 
foreign  orders.  These  forms,  giving  the  kind  of  goods 
ordered,  the  specifications,  number  of  units,  and  specific 
instructions  regarding  packing  and  shipping,  are  for- 
warded to  the  traffic  department. 

2.  The  Trafiic  Department  arranges  for  the  sailings, 
stamps  the  order  with  the  date  when  the  goods  are  to  be 
ready  in  order  to  avoid  delay,  and  notes  any  special  in- 
structions that  must  be  complied  mth  because  of  the 
manner  in  which  the  goods  will  be  handled  in  loading  and 
unloading  the  ships  or  transporting  to  the  point  of 
destination. 

3.  The  Credit  Department  secures  a  report  on  the 
customer,  if  this  has  not  already  been  done,  and  deter- 
mines on  what  terms  the  customer  should  be  sold. 

4.  The  Planning  Department  checks  the  stock  on  hand 
to  see  if  the  order  can  be  filled  immediately.  If  not,  it 
issues  instructions  to  manufacture.  In  case  its  schedule 
does  not  permit  complying  with  the  date  set  by  the  traffic 
department  for  shipping,  the  planning  department  noti- 
fies both  the  export  and  traffic  divisions. 

5.  The  Shipping  Department  checks  the  finished  goods 
with  the  order  and  is  responsible  for  their  being  packed 
and  loaded  into  cars  which  have  been  provided  by  the 
traffic  division. 

6.  The  Traffic  Department  receives  the  returned  order, 
makes  out  the  bill  of  lading,  and  the  necessary  papers 
are  issued  and  sent  to  the  export  department. 

7.  The  Export  Department  stamps  the  prices  and 
terms  on  the  order  and  forwards  it  to  the  billing  de- 
partment. 

8.  The  Billing  Department  prepares  the  bills,  drafts, 
and  similar  documents  to  be  sent  to  the  customex'. 


554    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

9.  The  Accounting  and  Auditing  Department  then 
checks  the  bill  and  enters  the  amount  on  the  books. 

10.  The  Export  Department  then  mails  the  documents 
to  the  customer  so  that  they  mil  reach  him  as  soon  as 
the  shipment  of  goods. 

Should  the  MacLean  Paper  Company  adopt  the  pro- 
posed schedule  for  routing  foreign  orders? 
What  further  changes  in  its  schedule  are  advisable? 


Problem  140 

Denby  Company — Packing  Goods  for  Export* 

When  the  Denby  Company  first  started  its  export  busi- 
ness it  made  no  different  provisions  for  packing  wall 
board,  floor  covering,  roofing,  prepared  shingles,  and 
similar  products  than  were  used  for  long  distance  ship- 
ments in  the  United  States  and  Canada.  The  managers 
reasoned  that  in  sending  broken-lot  shipments  to  San 
Francisco  from  the  factory  in  the  East,  the  goods  would 
be  transferred  from  one  car  to  another  from  three  to 
five  times  and  would  be  subject  to  considerable  handling 
and  rough  treatment.      In  shipping  to  Cuba  the  goods 

*Upon  the  packing  of  goods  for  export,  see  Hough,  Practical  Export- 
ing, Chap.  XI;  Preciado,  Exporting  to  the  World,  Chap.  XIV;  Dudeney,  The 
Exporter's  KandhooTc  and  Glossary,  Chap.  XXX;  Irving  National  Bank, 
Trading  with  the  Far  East,  pages  113-117,  and  Trading  with  Latin  America 
(by  E.  B.  Filsinger),  pages  119-125;  Hooper  and  Graham,  Import  and 
Export  Trade,  pages  46-48;  Bacher,  Export  Technique,  (Business  Train- 
ing Corp.),  Chap.  IX;  also  the  following: 

Proceedings  of  conventions  of  National  Foreign  Trade  Council : 

1918,  p.  555,  Grosvenor  M.  Jones — "South  American  Port  Facilities 
as  Eelated  to  the  Subject  of  Export  Packing." 

1919,  p.  557,  Capt.  H.  R.  Moody— " Packing  for  Export." 

1921,    p.    260,    C.    C.    Martin— "One    Essential    of    Successful    Ex- 
porting. ' ' 

The  World's  Markets. 

Aug.  1919,  p.  26— "Packing   for  Export." 

July   1920,  p.  34— "An   Example   of   Poor   Packing." 

Aug.   1920,  p.  41— "Theft  and   Pilferage." 

Nov.  1920,  p.  29— "Good  Export  Packing." 


DELIVERY    OF    EXPORT    ORDERS  555 

would  be  loaded  into  the  ship  and  unloaded  at  their 
destination  with  no  change  or  excess  handling.  Conse- 
quently, these  men  believed  that  with  reasonable  care 
the  same  packing  would  be  sufficient. 

They  found,  how^ever,  that  in  loading  the  ship  their 
goods  were  placed  in  a  sling,  hoisted  over  the  side,  and 
dropped  into  the  hold.  There  they  were  tossed  into  the 
most  convenient  space  available.  Boxes  and  other  mer- 
chandise were  piled  into  the  same  hold  and  during  the 
voyage  much  chafing  and  many  hard  knocks  resulted 
whenever  rough  weather  was  encountered.  In  unloading, 
the  goods  w^ere  subjected  to  similar  treatment  and  fre- 
quently were  left  on  the  docks  exposed  to  the  rain  and 
sun  for  weeks  at  a  time.  When  the  goods  were  finally 
loaded  aboard  a  truck  it  was  found  that  foreigners  did 
not  take  the  same  care  as  Americans.  In  unloading, 
boxes  and  crates  were  often  pushed  off  the  truck  and 
allowed  to  fall  to  the  ground  instead  of  being  eased  down 
as  was  the  custom  in  the  United  States. 

As  the  foreign  trade  of  the  Denby  Company  has  de- 
veloped, it  has  been  found  that  the  foreign  customers 
watch  shipments  more  closely  than  the  average  Ameri- 
can. Crates,  boxes,  and  paper  must  be  better  in  order  to 
preserve  the  goods  in  proper  condition  because  of  the 
unusual  handling  and  exposure  which  they  must  under- 
go. Occasionally,  foreign  clients  even  go  so  far  as  to  lay 
down  extreme  rules  which  the  company  must  follow  in 
packing  their  goods,  the  additional  expense  being  charged 
to  the  customer. 

June  1921,  p.  22 — "Problems  of  Exporters  to  Europe." 
June   1921,  p.   27— "Export   Packing." 

Export   Trade  and  Exporters'   Eeview. 

Apr.  19,   1919,  p.   24— "The  'Eailroads'   of   Africa." 
July  10,  1920,  p.  14 — "Shipping  Goods  to  the  Mexican  Importer." 
Oct.  9,  1920,  p.  58 — "Important  Factors  in  Proper  Export  Packing." 
Mar.    5,    1921,   p.    16 — "Society    Island    Banking    System    Eestricts 

Trade." 
July   9,    1921,   p.   12 — "A   Freight   Agent's  Viewpoint   on   Foreign 

Packing. ' ' 
Sept.  10,  1921,  p.  5— "That  Perplexing  Packing  Problem." 
Oct.  1,  1921,  p.  64— "Better  Packing  the  Vital  Problem." 
Oct.  8,  1921,  p.  18— "Where  Climate  Calls  for  Special  Packing." 
May  20,  1922,  p.  24— " Conditions  in  Kobe  Call  for  Strong  Packing." 


556    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Numerous  complaints  had  convinced  the  company  that 
its  success  in  foreign  trade  depended  on  delivering  its 
merchandise  promptly  and  in  good  condition.  Its  export 
business  had  grown  to  almost  $1,100,000  annually  and, 
therefore,  a  man  experienced  in  preparing  goods  for 
foreign  shipment  was  employed  as  the  head  of  the  pack- 
ing and  shipping  department.  This  man's  duty  was  to 
lay  down  specifications  for  packing  each  shipment,  give 
instructions  as  to  how  the  work  should  be  done,  and  in- 
spect each  shipment  to  see  that  his  instructions  had  been 
carried  out.  Improvement  was  noticed  at  once;  but  al- 
though the  number  of  complaints  was  lessened  a  few  of 
the  company's  foreign  customers  continued  to  find  fault. 

Upon  investigation  it  was  found  that  in  packing  floor 
covering,  although  the  burlap  had  been  sewn  on  the 
outside  as  the  foreman  had  instructed,  the  packers  had 
left  out  the  waterproof  paper  in  which  each  roll  should 
have  been  wrapped.  Instances  of  a  similar  nature  oc- 
curred from  time  to  time  and  the  export  manager  decided 
that  a  standard  practice  should  be  laid  down  for  the 
packing  of  merchandise  for  shipment  abroad.  He  pro- 
posed that  an  efficiency  expert  should  study  the  best 
methods  of  packing  the  products  which  the  company  ex- 
ported and  that  these  specifications  should  be  accessible 
to  all  men  in  the  packing  department.  Then,  when  an 
order  was  received  to  ship  roofing  paper  to  New  Zealand, 
the  notation  would  be  made  * '  Pack  according  to  standard 
practice  19."  These  standard  practice  instructions 
would  be  as  follows: 

FLOOR  COVERING— FINISHING  OF,  FOR  EXPORT 

Finished  in  regular  way  and  in  addition  the  roll  is 
placed  inside  a  burlap  covering  84"  long  and  38"  in  cir- 
cumference sewed  from  40"  burlap.  Slack  is  taken  up 
on  sides  by  sewing,  and  two  "ears"  left  at  each  end  to 
permit  easy  handling.  Additional  labol  pasted  outside 
the  burlap. 

Net  wt.  60  sq.  yd.  roll 209.     lbs.  approx. 

Regular  finishing  materials . . .       7.0 
Burlap  cover   1.1 

Shipping  weight   217.0  lbs.  approx. 


DELIVERY  OF  EXPORT  ORDERS 


SSt 


Outside  dimensions  of  60  sq.  yd.  roll  finished  in  burlap 
12"  D.x73''. 


WALL  BOARD  CRATES  FOR  EXPORT 

Material — spruce 
Sides  11/2''  stock 
Ends  11/2' 
Slats     1/2' 

Slats  6"  wide  to  be  9"  apart. 
All  crates  bound  in  strap  iron 
around  ends. 


Sheet 
Size 

7x32 

8x32 

9x32 

10x32 

12x32 

7x48 

8x48 

9x48 

10x48 

12x48 


No.  in 
crate 

50 
50 
37 
37 
37 

37 
37 
24 
24 
24 


Sq.  ft. 
I  sheet 


18  2-3 
211-3 
24 

26  2-3 
32 

28 
32 
36 
40 

48 


Sq.  ft. 
in  crate 


933  1-3 
1066  2-3 


Inside  dimensions  of  Cu.  ft. 

crate  (must  be  exact)         space  of 
Length  Width       Depth     crate 


986  2-3 
1184 

1036 
1184 

864 

960 
1152 


841// 

961/2' 

IO8I/2' 

1201/2' 

1441/2' 

841/2' 

96i/>' 

108 1/0' 

1201/2' 

1441/2' 


321/4' 
321/4' 
321/4' 
321/4' 
321/4' 

481/4' 
481/4' 
481/4' 
481/4' 
481/4' 


16.5 
18.8 
16.3 
18.1 
21.6 

16.7 
18.5 
16.9 

18.7 
22.3 


These  dimensions  allow  for  lining  crates  mth  case 
lining  only.    No  wrapping  on  the  wall  board. 

Numerous  objections  were  raised,  however,  to  the  ex- 
port manager's  plan.  In  the  first  place  it  would  be  ex- 
pensive to  employ  an  efficiency  expert  to  plan  the  stand- 
ard practice  for  packing  for  export.  Furthermore,  it 
was  pointed  out  that  it  was  not  necessary  to  pack  goods 
for  shipment  to  all  foreign  ports  with  the  same  care 
that  was  needed  in  shipping  to  Australia  or  other  dis- 
tant markets.  The  regulations  of  various  countries  in 
regard  to  stencilling,  marking,  and  packing  certain 
grades  of  merchandise  varied  from  time  to  time  and 
changes  would  have  to  be  made  accordingly.  Also,  several 
of  the  officials  asserted  that  even  if  such  cards  were  made 
up,  the  men  in  the  packing  room  would  not  consult  them. 
They  said  that  the  shippers  had  already  been  instructed 


658    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

in  the  proper  method  of  packing:  for  export  and  that  the 
present  complaints  which  the  comjjany  was  receiving 
were  due  to  their  failure  to  follow  instructions.  They 
said  that  the  present  foreman  understood  the  details  of 
this  w^ork  and  that  it  was  up  to  him  to  get  results. 

Should  the  Denby  Company  adopt  a  standard  practice 
for  packing  goods  for  export? 


Problem  141 
The  Hood  Adding  Machine  Company — Packing  of  Machinery 

In  July,  1920,  the  Hood  Adding  Machine  Company  of 
Hoboken,  New  Jersey,  received  an  order  from  a  large 
mining  company  in  the  Peruvian  Andes  for  three  add- 
ing machines  to  be  delivered  within  three  months,  with 
sight  draft  against  documents.  The  Hood  Company  had 
no  agent  in  that  country  nor  up  to  the  time  had  they 
engaged  in  any  trade  with  Latin  American  countries. 

The  machines  were  shipped  by  way  of  the  Panama 
Canal  and  Callao  to  destination.  They  were  packed  in 
wooden  boxes  lined  with  burlap  and  the  machines  were 
braced  on  the  inside  to  hold  them  solid.  Transshipment 
had  to  be  made  at  Panama  where  the  machines  had  to 
remain  for  some  time. 

The  shipment  was  delivered  in  October,  and  the  draft 
was  paid  upon  presentation  of  the  documents  to  a  bank 
in  Lima.  When  the  consignees  inspected  their  machines, 
how^ever,  they  found  that  all  of  them  were  rusted  beyond 
repair.  Immediately  they  put  in  a  claim  to  the  Hood 
Company  for  full  restitution  of  the  purchase  price. 

How  should  these  machines  have  been  packed!  What 
action  should  the  Hood  Company  take  against  such  a 
claim?  What  other  action  should  have  been  taken  to 
protect  further  possible  business  in  Peru? 


DELIVERY    OF    EXPORT    ORDERS  559 

Problem  142 

The  Murray  Company — Changing  Packing  Methods* 

The  Murray  Company,  which  sells  women's  garment 
trimmings,  such  as  soutache,  rickrack,  and  other  decora- 
tive braids,  grosgrain  ribbon,  moire  beltings,  fancy  lac- 
ings, and  similar  products,  has  received  frequent  requests 
from  foreign  customers  to  use  tin-lined  cases  in  packing 
goods  for  foreign  shipments.  Many  of  these  shipments 
are  made  to  Japan,  China,  India,  and  South  America, 
where  goods  must  pass  through  tropical  countries  en 
route  to  port  of  destination.  Being  subjected  to  a  hot, 
moist  climate,  or  being  unloaded  from  ships  by  freight 
lighters,  they  must  be  packed  in  such  a  manner  as  to 

*For  the  use  of  parcel  post  in  export  trade,  cf.  the  following:  Johnson, 
Ocean  and  Inland  Water  Transportation,  Chap.  VII;  Preciado,  Exporting 
to  the  World,  pages  69-73 ;  Irving  National  Bank,  Trading  with  the  Far 
East,  pages  123-125,  and  Trading  with  Latin  America  (by  E.  B.  Filsinger), 
pages  112-114;  E.  G.  Dun  &  Co.,  Practical  Helps  for  Exporters,  Pamphlet 
No.  2  and  Pamphlet  No.  23;  Port  of  Boston,  March  1919,  "Parcel  Post  as 
an  Aid  to  Foreign  Trade. ' ' 

Boston  Evening  Transcript. 

April   10,   1919— "World  Parcel  Post." 

April   10,   1919 — "Parcel  Post   Developments." 

The  World's  Markets. 

Mar.  1919,  p.  26— "Better  Foreign  Parcel  Post  Advocated." 

Nov.  1919,  p.  26— "Parcel  Post  Progress." 

Nov.  1919,  p.  37— "Parcel  Post  to  Cuba." 

Feb.  1920,  p.  37— "Parcel  Post  Extensions." 

May   1921,  p.  25— "Postal  Extensions." 

Mar.   1922,   p.    17— "Improved  Postal   Facilities." 

Printers'  Inlc. 

Apr.    10,    1919,    p.    109— "Urges   Better    International    Parcel   Post 

Arrangements. ' ' 
Oct.   28,   1920,   p.   89— "How   to   Use  the   Foreign   Mail    Service   in 

Export. ' ' 

Export   Trade  and  Exporters'  Review. 

Mar.  12,  1921,  p.  12— "Sales  by  Mail  to  the  Tropical  Dealer." 
Apr.  30,  1921,  p.  55— "Our  Parcel  Post  Exports." 
Dec.  31,  1921,  p.  18— "A  Method  of  Stopping  Short  Postage." 
Feb.  4,  1922,  p.  9— "Preparing  Parcel  Post  Shipments." 

National  Foreign  Trade  Council — "International  Parcel  Post  Extension," 
by  Hon.  Otto  Praeger;  and  proceedings  of  1919  convention,  p.  434 — 
"Direct  Selling  through  the  Parcel  Post,"  by  M.  D.  Howell. 


560    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

guard  against  iniklew,  damage  from  salt  water,  and  other 
causes. 

The  company's  present  method  of  packing  foreign 
shipments  is  to  use  a  case  made  of  pine  stock  seven- 
eighths  of  an  inch  thick,  carefully  fitted  together  with 
tongue  and  groove.  Each  case  has  a  heavy  waterproof  lin- 
ing; the  individual  packages  of  merchandise  are  wrapped 
in  burlap  and  secured  with  a  lead  seal ;  the  case  is 
then  bound  with  strap  iron  on  all  sides.  Although  com- 
plaints have  been  received  occasionally,  most  shipments 
have  apparently  arrived  in  good  condition.  To  change 
the  present  container  to  a  tin-lined  case  would  more  than 
double  the  packing  charges  and,  because  of  the  price 
competition  with  European  houses,  this  alteration  has 
not  heretofore  been  regarded  favorably.  But  because 
the  number  of  customers'  complaints  appears  to  be  in- 
creasing the  firm  is  considering  whether  it  should  con- 
tinue its  present  packing  methods,  assuming  the  risk  of 
delivering  the  merchandise  in  good  condition,  or  whether 
it  should  increase  its  costs  through  the  adoption  of  better 
packing  methods. 

Many  articles  have  appeared  in  trade  papers  decrying 
American  packing  methods  but  in  the  words  of  the  presi- 
dent of  the  Murray  Company — "The  incidents  quoted 
in  trade  papers  illustrating  the  poor  packing  methods  of 
American  exporters  are  either  exceptional  or  else  are  the 
war-time  mistakes  made  by  a  few  inexperienced  ex- 
porters who  were  entirely  ignorant  of  conditions  abroad. 
Most  foreigners  have  but  little  conception  of  the  methods 
of  doing  business  in  the  United  States.  When  they  fail 
to  specify  that  they  have  no  cranes  for  handling  freight 
and  that  all  cargo  must  be  handled  by  hand,  a  few  manu- 
facturers make  the  mistake  of  shipping  twelve  hundred 
pound  cases.  Occasionally  one  case  out  of  a  large  ship- 
ment of  goods  may  be  run  over  by  a  truck  or  damaged 
by  being  pitched  off  the  top  of  a  high  truck  load.  Such 
accidents  are  impossible  to  prevent,  yet  German  and 
other  foreign  agents  have  made  much  of  such  scattered 
instances  and  have  spread  the  story  that  American  pack- 


DELIVERY    OF    EXPORT    ORDERS  561 

ing  methods  are  inefficient.  As  a  matter  of  fact  the 
American  exporters,  as  a  class,  are  among  the  most  suc- 
cessful in  the  world,  their  methods  are  evolved  after 
scientific  study,  and  they  are  not  content  to  follow  the 
old-fashioned,  rule-of-thumb  practice  of  foreign  houses. 

**As  for  packing  all  foreign  shipments  in  tin-lined 
cases,  let  me  tell  you  an  incident  which  occurred  only 
the  other  day.  We  had  an  order  from  a  Japanese  firm 
requesting  that  its  merchandise  be  shipped  in  tin-lined 
cases.  The  cost  of  carrying  out  these  packing  instruc- 
tions would  have  made  it  unprofitable  for  us  to  have 
filled  this  order.  As  soon  as  we  learned  what  the  ad- 
ditional cost  would  be,  we  cabled  the  Japanese  firm  in 
Yokohama  explaining  to  them  the  cost  of  carrying  out 
their  instructions,  but  saying  that  we  Avould  be  glad  to 
carry  out  their  wishes  providing  they  would  pay  for  the 
additional  cost.  We  received  a  reply  almost  immediately 
advising  us  to  pack  the  shipment  in  our  usual  manner. 

''The  actual  number  of  complaints  of  damaged  ^oods 
resulting  from  our  present  method  of  packing  has  been 
small;  but  in  spite  of  this,  many  of  our  customers  ap- 
pear to  favor  tin-lined  cases  because  European  houses 
frequently  use  this  method  of  packing.  Where  skilled 
labor  is  comparatively  cheap,  tin-lined  cases,  fastened 
together  with  screws,  and  other  elaborate  packing 
methods  are  not  prohibitive,  but  in  America,  where  wage 
rates  are  high,  economical  production  demands  a  mini- 
mum amount  of  hand  labor.  But  it  must  be  remembered 
that  most  foreign  buyers  can  scarcely  be  expected  to 
continue  to  order  goods  unless  they  are  satisfied.  There 
may  be  little  or  no  actual  cause  for  their  demands,  but 
in  selling  in  the  foreign  field  the  prejudices  and  buying 
habits  of  our  customers  must  be  taken  into  account.  I 
must  admit  that  we  are  in  a  quandary  as  to  what  attitude 
we  should  take  toward  the  demand  of  our  customers  that 
we  use  tin-hned  cases  in  foreign  shipments." 

A  proposal  has  been  made  that  the  company  should 
devise  a  number  of  small  containers,  should  break  up  its 
shipments  into  comparatively  small  lots,  and  utilize  par- 


662     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

eel  post  facilities  in  many  countries  instead  of  attempting 
to  send  shipments  in  large  cases  by  ocean  freight.  To 
what  extent  is  this  proposal  practicable? 


Problem  143 
National  Packing  Machine  Company — Methods  of  Packing 

Believing  that  the  suggestion  of  one  of  its  customers 
as  to  the  desirability  of  shipping  a  machine  in  small  cases 
was  made  in  the  light  of  a  suggestion  rather  than  a  re- 
quirement, the  National  Packing  Machine  Company 
shipped  one  of  its  3900-lb.  machines,  knocked  down,  in 
two  cases  to  a  small  town  located  near  Bucaramanga,  Co- 
lombia.* With  the  modern  equipment  at  the  docks  in 
New  York  the  cases  were  easily  loaded  into  the  hold  of 
the  steamer;  and  although  the  unloading  was  more  diffi- 
cult at  Barranquilla,  nevertheless  it  was  accomplished. 
There  the  machine  remained  on  the  docks  for  over  a  year 
because  in  order  to  reach  their  destination  the  cases  had 
to  be  loaded  into  a  steamer  by  hand,  carried  up  Magda- 
lena  River,  transferred  to  a  short  railroad  line  running 
to  Bucaramanga,  and  then  carried  by  j)ack  mules  for 
almost  100  kilometers. 

To  avoid  such  losses  in  the  future,  the  company  is  con- 
sidering the  adaptation  of  its  shipping  methods  to  the 
local  conditions  in  each  country.  At  several  Japanese 
ports,  for  example,  machines  must  be  unloaded  by  hand 
because  of  the  lack  of  mechanical  equipment;  at  some 
South  American  ports  the  machines  must  be  unloaded 
by  lighters  because  the  harbor  is  too  shallow  to  permit 
the  ships  to  approach  the  docks;  whereas  in  other  cases 
the  machines  must  be  packed  on  the  backs  of  mules  or 
llamas  because   of  the  lack   of  modern   transportation 

*Although  many  articles  on  packing  and  shipping  goods  for  export 
have  appeared  in  foreign  trade  magazines,  the  officials  of  the  National 
Packing  Machine  Company  have  always  held  that  these  admonitions  applied 
to  shoes,  textiles,  and  similar  merchandise  rather  than  to  the  shipping  of 
machinery. 


DELIVERY    OF    EXPORT    ORDERS  563 

facilities.  To  assist  in  this  work  it  is  proposed  that  sales- 
men should  submit  with  their  orders  more  detailed  ship- 
ping instructions  than  are  given  at  the  present  time  in 
order  to  assist  the  shipping  department  in  packing  each 
machine  to  meet  local  conditions  abroad. 

At  the  outset  this  plan  meets  with  serious  difficulty. 
One  of  the  company's  machines  which  weighs  3900  lbs., 
completely  assembled,  cannot  be  broken  do^vn  to  less 
than  150-lb.  packs  without  complete  dismantling.  Al- 
though 75-lb.  packs  are  frequently  requested  for  pack 
trains  in  the  mountain  districts,  to  take  a  machine  com- 
pletely apart  is  not  only  costly  because  of  the  skilled 
labor  required,  but  it  is  also  a  dangerous  policy  as  it  is 
difficult  for  even  the  company's  traveler  to  assemble  it 
again  with  the  assistance  of  only  native  mechanics. 
Furthermore,  the  base  which  alone  weighs  1200  lbs.  is 
cast  in  a  single  piece  and  cannot  be  ordered  broken  down. 

It  might  be  possible  to  change  the  design  of  the  ma- 
chine so  that  the  objection  of  a  heavy  base  could  be 
overcome.  Several  competitors '  machines  are  capable  of 
being  broken  do\\Ti  into  standard  packs  for  transporta- 
tion, but  the  National  machines  are  superior  in  operation 
to  those  of  competitors  mainly  because  of  this  sturdy 
base.  The  cost  of  making  this  change  would  be  con- 
siderable, since  it  involves  discarding  patterns  in  use  at 
the  present  time ;  besides  the  proportion  of  foreign  orders 
requiring  packing  in  small  cases  is  not  large. 

Another  plan  proposed  is  that  the  engineers  of  the 
National  Packing  Machine  Company  should  work  out 
methods  of  handling  heavy-weight  cases  by  block  and 
tackle  that  could  be  easily  put  into  effect  by  foreign 
workmen.  Photographs  showing  four  mules  properly 
equipped  with  yokes  and  pack  saddles  to  handle  the 
heavy  base  could  be  sent  to  the  customer  together  with 
full  instructions  as  to  the  necessity  for  frequent  rest  and 
changes  of  animals  under  such  heavy  load.  Diagrams 
showing  the  center  of  gravity  of  the  case  and  giving 
suggestions  as  to  the  best  way  of  equalizing  the  load 
might  also  be  sent.    By  utilizing  these  suggestions,  based 


564    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

on  past  experience  in  similar  situations,  the  customer 
or  his  agent  should  be  aided  materially  in  transporting 
this  machinery. 

Usually,  however,  as  the  work  of  transporting  mer- 
chandise is  done  by  agents  familiar  only  with  the  tra- 
ditional methods  of  handling  merchandise  it  is  doubtful 
how  much  help  would  be  derived  from  such  instructions. 
Furthermore,  the  engineers  not  being  familiar  with  the 
roads  over  which  the  shipment  was  being  transported 
might  suggest  in  their  instructions  a  hitch  which  it  would 
be  impracticable  to  use  on  a  narrow  pass.  If  in  attempt- 
ing to  follow  the  company's  instructions  the  machinery 
were  injured  in  transport,  it  is  quite  possible  that  the 
customer  would  hold  the  company  responsible  for  dam- 
ages to  his  shipment  which  were  in  reality  due  to  mis- 
takes committed  by  his  agent. 


Problem   144 
Reid  Chemical  Export  Company — Inspection  of  Cargo 

The  Reid  Chemical  Export  Company  was  organized 
to  carry  on  the  foreign  trade  of  a  number  of  chemical 
manufacturers  located  for  the  most  part  on  the  eastern 
sea-board  of  the  United  States.  The  products  handled 
by  this  company  vary  from  commercial  fertilizers,  bleach- 
ing powder,  and  sulphuric  acid,  shipped  in  large  glass 
carboys,  to  chemical  dyes  and  high-grade  drugs.  The 
firm  maintains  an  office  in  New  York  City  and  distributes 
its  products  abroad  through  commission  houses,  manu- 
facturers' agents,  and  two  or  three  of  its  own  salesmen. 
Arrangements  for  cargo  space,  insurance,  and  other  mat- 
ters, on  orders  not  handled  by  commission  houses,  are 
usually  taken  care  of  by  the  Reid  Company  itself. 

One  of  the  principal  difficulties  the  firm  is  facing  in 
the  export  field  is  the  number  of  complaints  made  by  its 
customers  as  to  the  condition  in  which  its  goods  are  re- 
ceived.   Before  the  recent  depression,  high-grade  chemi- 


DELIVERY    OF    EXPORT    ORDERS  565 

cals  were  difficult  to  obtain  and  few  objections  were  filed 
on  the  part  of  customers  as  long  as  the  goods  finally 
arrived.  With  the  fall  in  price  there  has  been  a  large 
increase  in  the  number  of  complaints  received.  The 
Reid  Company  has  frequently  tried  to  hold  the  steamship 
companies  responsible  for  the  damaged  condition  in 
which  its  products  have  been  turned  over  to  foreign 
buyers,  but  without  much  success.  When  the  firm  claims 
that  the  goods  were  not  properly  handled  or  stowed 
by  the  steamship  company,  the  counter-charge  is  made 
that  they  were  not  packed  properly  to  begin  wdth,  or 
that  the  damage  occurred  before  the  goods  were  turned 
over  to  the  steamship  company  or  after  the  ship  had  dis- 
charged its  cargo  at  the  foreign  port. 

The  Reid  Company  has  investigated  the  packing 
methods  of  the  chemical  manufacturers  that  it  represents 
and  it  has  found  that  ordinarily  it  would  be  not  only  diffi- 
cult, but  expensive,  to  improve  on  present  methods.  Most 
of  the  recent  complaints  have  arisen  over  shipments  of 
bleaching  powder  which  has  a  highly  corrosive  action 
on  the  steel  containers  in  which  it  is  shipped.  If  the 
product  is  not  carefully  stowed  or  is  placed  where  it 
will  come  in  contact  with  sea  water  the  corrosive  action 
is  accelerated  with  the  result  that,  not  only  is  the  product 
rendered  useless  through  exposure  to  water  and  air,  Irat 
occasionally  other  products,  stowed  in  immediate  prox- 
imity, are  ruined  by  the  action  of  the  powder.  Although 
the  steamship  company  is  responsible  for  the  proper 
loading  and  stowing  of  all  cargo,  the  Reid  Company  is 
considering  whether  it  would  not  be  advisable  to  estab- 
lish an  inspection  system  at  the  docks  to  insure  proper 
attention  to  this  work. 


566    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  145 

Thompson  Roofing  Company — Preventing  Damage  in 
Shipment 

Although  the  Thompson  Roofing'  Company  has  taken 
steps  to  insure  the  proper  packing  of  foreign  shipments, 
claims  for  damages  continue  to  come  in  from  many  cus- 
tomers. At  present  each  roll  of  roofing  paper  is  wrapped 
in  two  thicknesses  of  heavy  paper,  sheet  iron  plates  cover 
each  end  and  are  held  in  place  by  an  iron  rod  passing 
through  the  hollow  core  of  the  roll  which  is  then  covered 
with  burlap,  stencilled,  and  tagged  with  the  company's 
name  and  address.  The  export  manager  is  convinced 
that  it  would  be  very  costly  to  improve  the  packing  on 
each  roll  and  it  is  his  opinion  that  the  transportation 
companies  are  at  fault.  To  settle  the  matter  he  sent  a 
special  agent  to  New  York  City  to  inspect  and  report  on 
the  methods  of  handling  and  loading  merchandise  on 
all  boats  carrying  Thompson  roofing  paper  in  their 
cargoes. 

After  six  weeks '  investigation  the  agent  reported  that 
the  fault  lay  both  with  the  Thompson  Roofing  Company 
and  with  the  steamship  lines.  He  stated  that  about  one- 
half  the  difficulty  appeared  to  be  due  to  the  steamship 
company.  In  loading  a  shipment,  rolls  of  roofing  paper 
were  put  in  a  sling,  hoisted  over  the  ship's  side,  and 
dropped  into  the  hold.  In  stowing  the  cargo  below 
decks  insufficient  care  was  taken  to  secure  freight  so  that 
it  would  not  be  tumbled  about  when  the  ship  struck 
rough  weather  on  its  voyage.  The  inspector  stated,  how- 
ever, that  fully  fifty  per  cent  of  the  trouble  was  caused 
by  the  company's  method  of  scheduling  and  handling 
shipments.  As  soon  as  an  order  was  filled  at  the  mill 
the  company  sent  the  shipment  to  New  York.  There  it 
was  either  left  around  on  the  dock,  if  the  time  at  which 
it  arrived  was  near  the  date  of  sailing,  or  was  taken 
to  a  warehouse  for  temporary  storage.  The  roofing 
paper  that  was  left  on  the  dock  was  exposed  to  rain  and 
other  elements,  frequently  bumped  into  by  trucks,  many 


DELIVERY    OF    EXPORT    ORDERS  667 

shipments  being  broken  up  because  they  were  moved  to 
different  places  by  laborers  in  order  to  make  passage- 
way for  trucks.  By  sending  the  roofing  paper  to  the 
warehouse  the  additional  expense  of  loading  and  truck- 
ing the  goods  from  the  freight  yard  to  the  warehouse, 
warehouse  charges,  and  the  loading  and  trucking  from 
the  warehouse  to  the  wharf  were  incurred.  There  was 
also  chance  of  injury  from  such  handling,  since  the  roof- 
ing paper  was  frequently  tumbled  off  the  truck  and 
dumped  into  the  warehouse  without  proper  care  being 
taken. 

To  remedy  the  trouble  with  the  steamship  company 
the  agent  of  the  Thompson  Roofing  Company  suggested 
frequent  inspection  of  the  loading  of  freight,  particularly 
that  going  to  Australia  and  other  distant  parts  where 
because  of  the  long  voyage  the  ship  would  be  subject  to 
much  buffeting  by  the  waves.  To  remedy  the  damage 
caused  by  the  company 's  faulty  method  of  handling  ship- 
ments, the  agent  suggested  that  all  shipments  should  be 
scheduled  from  the  mill  so  that  the  goods  would  arrive 
on  the  wharf  not  more  than  a  day  or  two  before  the 
steamer  loaded.  This  schedule  could  be  followed  with 
comparative  ease,  since  the  traffic  manager  is  furnished 
with  the  monthly  sailing  list  of  vessels,  the  date  of  sail- 
ing, and  their  destination. 

Such  a  system  would  eliminate  the  damage  from  ex- 
posure to  the  weather  and  the  injury  to  the  goods  from 
being  run  into  by  trucks  or  tumbled  about  the  wharf. 
It  would  also  eliminate  excess  trucking  and  warehousing 
charges  and  the  agent  explained  that  with  the  fast  freight 
service  available  it  should  be  possible  to  schedule  ship- 
ments from  the  factory  to  reach  the  steamer  with  a  lee- 
way of  from  24  to  48  hours. 

The  general  manager  said  that  although  this  system 
might  work  for  a  company  with  a  factory  located  near 
the  port,  it  would  not  be  practicable  for  the  Thompson 
Company  with  its  factory  located  in  Ohio,  several  hun- 
dred miles  from  New  York  City.  The  freight  service 
was  uncertain,  and  although  fast  freight  should  deliver 


568    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

goods  in  New  York  in  two  or  three  days'  time,  there 
were  a  number  of  instances  where  it  had  failed  to  do  so. 
He  agreed  that  the  company  might  save  money  from 
damage  claims ;  but  if  one  shipment  out  of  ten  arrived 
too  late  to  make  the  boat,  the  customers  who  were  dis- 
appointed would  undoubtedly  give  their  orders  to  a  com- 
petitor in  the  future  and  the  firm  might  lose  more  money 
in  the  end.  Furthermore,  the  company  frequently  en- 
gaged cargo  space  some  time  ahead  in  order  to  secure 
the  lowest  possible  rates.  If  the  roofing  paper  failed  to 
arrive  before  the  ship  sailed,  this  space  would  have  to 
be  paid  for  and  more  money  might  be  lost  in  this  way 
than  would  be  saved  by  partially  eliminating  damages  on 
the  other  nine  shipments. 

Should  the   Thompson   Roofing   Company   adopt  the 
suggestion  of  its  agent? 


Problem  146 

Parker  Tire  MANUFACxuftiNG  Company — Packing 
AND  Shipping  Goods  for  Export 

In  1919  Romero  Quesada  of  Buenos  Aires  visited  the 
United  States  to  make  arrangements  with  manufacturers 
in  this  country  for  handling  their  products  in  Buenos 
Aires  "and  Rio  de  Janeiro.  Among  other  firms  the  Parker 
Tire  Manufacturing  Company,  located  in  Indiana,  ar- 
ranged to  give  him  an  agency  for  its  product.  Since  the 
company  had  no  New  York  office,  it  employed  a  forward- 
ing company  in  that  city  to  attend  to  the  details  of  ship- 
ping. Mr.  Parker  consulted  the  New  York  Classified 
Telephone  Directory  and  picked  the  Russell  Forwarding 
Company  because  its  name  was  printed  in  blacker  ink 
than  the  others.  Since  he  said  "all  that  was  necessary 
was  to  send  a  truck  to  the  railroad  depot,  get  the  goods 
and  take  them  to  the  wharf,"  the  choice  was  in  his  esti- 
mation of  little  importance. 

The  first  shipment  consisting  of  sample  tires  was  sent 
in  the  early  part  of  June,  1919.     Since  future  business 


DELIVERY    OF    EXPORT    ORDERS  569 

was  to  depend  on  these  samples  great  care  was  exercised 
in  selecting  the  tires  for  this  shipment.  Mr.  Parker  gave 
the  selection  his  personal  attention,  supervising  each 
item  to  be  sent.  The  lot  was  then  sent  to  the  shipping 
department  and  Mr.  Parker  turned  his  attention  to  other 
matters. 

About  ten  days  later  he  was  surprised  to  receive  a 
wire  sent  collect  from  the  Russell  Forwarding  Company 
as  follows: — 

''STEAMSHIP  ELMIRA  ON  WHICH  SPACE  FOR 
TIRE  SHIPMENT  ENGAGED  NOW  LOADING 
WHEN  WILL  SHIPMENT  ARRIVE 

RUSSELL  FORWARDING  COMPANY" 

He  immediately  called  in  his  shipping  clerk,  who  in- 
formed him  that  on  account  of  rush  shipments  he  had  not 
sent  the  South  American  lot.  The  man  said  it  would 
take  so  long  to  go  anyway  that  he  did  not  think  it  w^ould 
make  any  ditference  if  this  shipment  were  delayed.  Mr. 
Parker,  realizing  from  the  wire  that  boat  connections 
must  be  made,  ordered  shipment  by  express  immediately 
and  wired  the  Russell  Forwarding  Company  that  it 
would  go  forward  at  once. 

Two  days  later  another  wire  was  received: — 

"PARKER  TIRE  MANUFACTURING  COMPANY 
BILL   LADING  MADE    OUT   TO   ROMERO   QUE- 
SADA   RECEIVED    INSTRUCT    EXPRESS    COM- 
PANY AT  ONCE  DELIVER  TO  US 

RUSSELL  FORWARDING  COMPANY" 

The  necessary  instructions  were  wired  to  the  express 
company  in  New  York  and  Mr.  Parker  said  to  his  secre- 
tary: ''At  last  we  have  got  that  shipment  off!"  A  few 
hours  later,  however,  the  New  York  bank  through  which 
he  had  arranged  to  finance  these  shipments  called  him 
on  the  long  distance  'phone.  The  bill  of  lading  was  not 
made  out  so  as  to  be  negotiable.  Would  he  please  substi- 
tute another  immediately  and  forward  it  by  special  de- 


570    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

livery?  The  bank  hoped  that  it  would  arrive  in  season 
for  the  goods  to  go  forward  on  the  boat  planned  for  so 
that  the  space  would  not  have  to  be  paid  for  and  not 
used.  Mr.  Parker  had  a  new  bill  of  lading  made  out  to 
the  Russell  Forwarding  Company  and  sent  it  forward 
at  once. 

The  next  morning  a  third  collect  wire  w^as  awaiting 
Mr.  Parker: — 

"PARKER  TIRE  MANUFACTURING  COMPANY 
TWELVE  BUNDLES  TIRES  ARRIVED  IMPROP- 
ERLY PACKED  FOR  FOREIGN  SHIPMENT  BILL 
LADING  SHOWED  ONLY  ONE  ITEM  WITH  NO 
NET  WEIGHTS  REQUIRES  CHANGE  IN  SPACE 
RESERVATION  WHICH  WE  HAVE  BEEN  ABLE 
TO  ARRANGE  NOT  TIME  FOR  REPACKING 
HAVE  MARKED  AND  NUMBERED  BUNDLES 
STEAMSHIP  COMPANY  WOULD  NOT  ISSUE 
CLEAN  BILL  LADING  BUT  HAVE  FORWARDED 
WITH  WAIVER  OF  RESPONSIBILITY  FOR 
DAMAGE  EN  ROUTE  AT  SUGGESTION  OF 
CHENEY  NATIONAL  BANK  PLEASE  CONFIRM 
ACTION 

RUSSELL  FORWARDING  COMPANY" 

Mr.  Parker  threw  the  telegram  down  helplessly,  be- 
ginning to  wish  he  had  never  tried  to  go  into  foreign 
business,  and  ordered  a  wire  sent  to  theRussell  Forward- 
ing Company  approving  their  action.  Later  in  the  mopn- 
ing  the  bank  telephoned  him,  stating  that  they  would  be 
liable  as  the  matter  stood  if  they  accepted  his  draft, 
since  the  steamship  company  could  not  be  held  for  dam- 
ages with  the  waiver  on  the  bills  of  lading.  He  assured 
the  bank  that  he  would  accept  full  responsibility  for 
damages. 

That  afternoon  he  called  in  his  head  shipper,  showed 
him  the  wires,  and  asked  him  why  the  shipment  had  not 
been  properly  packed.  The  shipper  said  he  had  given 
the  consignment  special  attention  and  had  packed  the 
tires  carefully  in  burlap,  with  the  edges  sewed  together. 
He  said  the  bales  had  been  more  carefully  packed  than 
any  shipment  he  had  ever  sent  and  he  did  not  under- 


DELIVERY    OF  EXPORT    ORDERS  571 

stand  what  the  New  York  export  men  were  thinking 
about.  When  asked  if  he  had  marked  the  bundles,  he  said 
that  he  had  tagged  each  one  with  two  tags,  as  was  his 
regular  custom,  and  that  he  had  wired  them  on  himself  to 
be  sure  they  were  secure.  He  said  he  did  not  understand 
what  was  meant  by  "bill  lading  showed  only  one  item 
with  no  net  weights."  He  had  put  on  the  gross  weight 
and  tare  for  the  shipment  and  did  not  know  what  more 
they  wanted.  They  could  figure  out  the  net  weight  if 
they  wanted  it. 

Neither  did  Mr.  Parker  know  what  was  wanted ;  conse- 
quently he  decided  he  had  made  a  bad  choice  of  for- 
warders and  that  the  Russell  Forwarding  Company  was 
unsatisfactory. 

How  should  the  shipment  have  been  packed  and 
shipped  ? 

What  was  wrong  with  the  Parker  Tire  Manufacturing 
Company  organization  that  such  mistakes  could  be  made 
on  that  shipment  even  when  everyone  in  the  company  was 
interested  to  have  it  handled  properly! 

Are  the  defects  such  that  they  can  be  corrected  with- 
out a  change  of  organization! 

If  a  change  must  be  made,  would  it  be  cheaper  and 
easier  to  turn  the  details  over  to  a  forwarding  company 
or  would  it  be  advisable  to  make  the  changes  in  the  pack- 
ing and  shipping  departments  in  the  event  that  the  ex- 
port business  develops! 


572    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  147 
KiNGSLEY   Company — Freight    Forwarding    Service* 

Although  the  Kiiigsley  Company  has  opened  an  ex- 
port office  in  New  York  it  is  continuing  to  use  the  services 
of  freight  forwarders  to  handle  its  shipments,  since 
the  company's  present  office  staff  consists  only  of  an 
export  manager  and  a  stenographer  who  devote  most  of 
their  attention  to  corresponding  with  foreign  customers, 
placing  foreign  advertising,  and  carrying  on  the  com- 
pany's business  with  commission  houses  and  foreign 
manufacturer's  agents.  Companies  with  no  representa- 
tives in  New  York  frequently  find  it  to  their  advantage 
to  deal  through  these  agencies,  but  these  functions  are 
being  performed  by  the  New  York  offices  of  a  number  of 
firms  and  the  Kingsley  Company  is  also  considering  the 
advisability  of  dispensing  with  the  forwarders'  services. 

This  firm  sells  electric  lighting  fixtures,  sockets,  plugs, 
and  similar  products,  most  of  its  foreign  business  being 
handled  through  commission  houses  and  manufacturers' 
agents  in  South  America,  China,  the  Dutch  East  Indies, 
Australia,  and  the  north  European  countries.  In  1919, 
its  foreign  sales  amounted  to  over  $200,000,  but  in  both 
1920  and  1921  they  fell  considerably  below  this  figure. 
Through  intensive  advertising  the  company  hopes  to  re- 

•For  information  upon  this  subject,  cf.  Hough,  Practical  Exporting, 
pages  40]  -409 ;  Kidd,  Kidd  on  Foreign  Trade,  pages  348  and  349 ;  Preci- 
ado,  Exporting  to  the  World,  Chap.  XVI;  Talbot,  The  Export  Forwarder, 
(Part  III  of  "Export  Houses",  Business  Training  Corporation);  Bacher, 
Export  Technique,  (Business  Training  Corp.),  Chap.  IV;  and  the  follow- 
ing articles: 

The  World's  Markets. 

Apr.  1919,  p.  22 — "The  Services  of  the  Freight  Forwarder." 
May  1919,  p.  38 — "Freight  Forwarding  for  Export." 
June  1921,  p.  37 — "Foreign  Freight  Forwarders." 

Export  Trade  and  Exporters'  Review. 

Apr.  30,  1921,  p.  64—* '  The  '  Why '  of  the  Freight  Forwarder. ' ' 
Dec.  31,  1921,  p.  11 — "The   Main   Avenues   of   a    Forwarder's   Ser- 
vice. ' ' 

Proceedings  of  conventions  of  National  Foreign  Trade  Council,  1919, 
p.  511 — "Freight  Forwarding  for  Export,"  by  W.  J.  Riley. 


DELIVERY    OF    EXPORT    ORDERS  573 

gain  its  former  position  in  the  foreign  field.  Since  the 
service  performed  by  freight  forwarders  is  charged  to 
customers,  unless  special  arrangements  are  made  to  the 
contrary,  the  company  is  not  concerned  directly  with  any 
saving  to  be  derived  by  handling  this  work  itself,  except 
in  so  far  as  more  economical  and  more  satisfactory  ser- 
vice increases  the  good-will  of  its  customers. 

By  securing  ocean  freight  rates  for  large  amounts  of 
cargo  space  the  freight  forwarder  is  in  position  to  ship 
small  units  at  a  cheaper  rate  than  can  usually  be  secured 
by  the  manufacturers,  but  it  has  been  the  experience  of 
the  Kingsley  Company  that  these  low  rates  are  not 
handed  on  to  customers.  In  other  words  the  freight  for- 
warder buys  space  at  wholesale  and  sells  it  at  retail,  thus 
securing  a  profit  in  addition  to  the  commission  usually 
paid  by  steamship  lines  to  forwarding  companies  who 
act  as  freight  brokers. 

In  making  a  careful  study  of  the  service  performed 
by  a  high-class  freight  forwarder,  the  export  manager 
secured  the  chart  of  a  forwarder's  functions  which  ap- 
pears on  page  574.*  This  chart  so  impressed  the  directors 
of  the  Kingsley  Company  with  the  complications  involved 
in  the  service  that  they  are  uncertain  whether  it  would 
not  be  better  to  continue  to  have  the  freight  forwarders 
perform  this  service  for  them  rather  than  for  the  com- 
pany to  try  to  handle  it. 

•The  chart  is  reproduced  by  courtesy  of  D.  C.  Andrews  &  Company  of 
JVew  York  and  Boston,  who  hold  the  copyright. 


574    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


GRAPHIC   CHART   SHOWING 

CO-ORDINATED   EXPORT  SHIPPING 


SHIPPER 


OF        THE        EXPOfiT       St 


J-TTT 


•ICRCHANOISE ^ 


FORM    23.     Kingsley    Company — Forwarder's    Functions 


DELIVERY    OF    EXPORT    ORDERS  575 

Problem  148 
Hartman  Rubber  Company — Shipping  Instructions 

In  shipping  rubber  shoes  to  Europe,  South  America, 
and  the  Far  East,  the  Hartman  Rubber  Company  has 
employed  the  services  of  several  freight  forwarders. 
Frequently  one  forwarder  specializes  in  Latin-American 
trade,  another  in  shipments  to  China,  and  still  another 
in  handling  goods  destined  for  Europe.  In  a  few  in- 
stances customers,  who  have  had  satisfactory  relations 
in  the  past  with  a  particular  forwarding  or  commission 
house  or  are  friendly  with  members  of  the  firm,  ask  that 
their  orders  be  handled  through  a  specified  agency.  As 
a  result  the  Hartman  Company  has  not  confined  its  busi- 
ness to  one  house,  but  has  dealt  with  a  number  of  dif- 
ferent freight  forwarders. 

During  the  war  a  number  of  freight  forwarding 
agencies  grew  up  in  New  York  and  other  parts  of  the 
United  States.  Some  of  these  agencies  were  run  by 
capable  and  efficient  men  who  had  had  years  of  ex- 
perience in  foreign  trade,  but  others  were  operated  by 
men  with  only  a  smattering  of  foreign  trade  knowledge 
who  hastened  to  take  advantage  of  the  profits  to  be  made 
by  handling  American  exports  during  the  boom  period 
brought  about  by  the  war.  This  latter  class  of  agencies, 
frequently  rendering  careless  and  inefficient  service,  was 
one  of  the  causes  of  the  poor  reputation  attributed  to 
American  exporters.  Although  a  number  of  these  firms 
have  since  gone  out  of  business,  the  Hartman  Rubber 
Company  was  not  without  its  share  of  experiences  with 
them. 

Because  the  services  rendered  by  different  firms  vary, 
misunderstandings  have  sometimes  arisen  and  the  com- 
pany's relations  with  forwarding  houses  have  not  been 
entirely  satisfactory.  In  some  instances  the  amount  of 
extra  service  charged  for  almost  doubled  the  estimated 
cost.  Customers  have  occasionally  complained  that  in 
transmitting  their  shipping  instructions  through  a  third 
party  their  orders  have  become  confused,  with  the  re- 


576    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


SHIPPING   INSTRUCTIONS. 


.192- 


Dcar  Sir 

Please  note  following  instructions  for  shipment  sent  to  your  care  to  be  forwarded. 

Make  B/L  in  name  of  ^ _^ . as  shippers 

r~  .     (Order  of 

Consign  to  jj^-^^^j     ' ■ " 

Address  of  Consignee  or   party   to  be  notified 


Destination  of  goods  _ 


DO  NOT  FAIL  TO  ADVISE  IF  PACKAGES  ARE  ADDRESSED  IN  FULL.  OR  HOW  MARKED 


MARKS  AND  NOS 


PACKAGES 


MCRCHANDISC 


^(Necessary  foi  Customs  Clearance)- 


Insure  against  Marine  risk  for  $_ 
Insure  against  War  risk  for  $ 


_  and  send  certificate  to  . 


Freight  to  New  York  to  be  charged  to   

Lighterage  \      ^j^^   -^  ^^^^  ^^  ^e  charged  to_ 
Cartage       ) 


.G.  O.  C    No, 


Your  services  to  be  charged  to_ 

Insurance  to  be  charged  to 

Consular  Fees  to  be  charged  to 
Ocean  Freight  to  be  charged  to_ 
Send Original 


-Declaration  No.. 
-Shipment  No. 


-Copies  B/L  to  Shipper,  and- 


-Original- 


-Copies  to  Consignee 


and/or 

Shipped  hence  per„ 


-Original  to_ 


-Railroad  in  Car  No.- 


Collect  for  our  account— Invoice  attached 

COD   $' 

Remarks 


C.  O.  D.  Collection  Charges  Payable ^^j^^^^- 


Yours  truly- 


FORM  24.    Hartman  Rubber  Company — Instructions  to  For- 
warders 


DELIVERY    OF    EXPORT    ORDERS 


677 


suit  that  they  have  not  been  carried  out  as  agreed  An 
investigation  has  shown  that  although  tlie  company  has 
not  been  responsible  for  the  majority  of  the  mistakes,  at 
least  some  ot  these  errors  have  been  due  to  vague  letters 
ot  instruction  being  sent  to  the  forwarding  firm 

To  prevent  a  recurrence  of  mistakes  of  this  nature  the 
Hartman  Company  has  decided  to  adopt  a  standard  form 
letter  to  cover  all  possible  instructions  to  its  forwarders 

ho'.'iT  ^"  ^'T  ^^^  "f  ^  ^'^^  "  ^'^''^'  ^"^^^§'1^^  forwarding 
house  during  the  war  has  been  selected  as  a  basis  for 
the  firm  s  new  letter,  but  it  has  not  been  decided  what 
modifications  should  be  made  to  meet  the  company's 
needs  under  present  conditions  ^  ^ 


578    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  149 

The  Noonan  Export  Company — Avoiding  Mistakes  in  Orders 

AND  Contracts 

Because  of  a  falling  off  in  export  shipments  the 
Noonan  Export  Company  has  been  forced  to  contract 
its  organization  with  great  rapidity  and,  although  the 
home  office  in  New  York  has  been  carefully  reorganized 
to  include  an  inspection  system  to  prevent  clerical  errors, 
mistakes  of  a  serious  nature  continue  to  happen.  This  is 
partially  due  to  the  fact  that  previously  the  company 
had  enough  business  to  have  one  man  responsible  for  all 
the  Australian  orders,  another  all  the  South  American 
orders,  and  so  on,  but  with  the  decreased  amount  of 
business  and  the  reduction  of  the  force,  one  man  must 
now  be  responsible  for  orders  to  several  countries.  The 
following  examples  are  more  or  less  typical  of  the  type 
of  errors  that  have  occurred. 

A  dealer  in  Peru  had  been  promised  that  liis  shipment 
of  lubricating  oil  would  arrive  the  latter  part  of  Febru- 
ary. Not  w^anting  to  have  a  large  stock  of  oil  on  hand, 
and  lacking  the  facilities  for  storing  it  for  any  length  of 
time,  this  dealer  had  visited  a  number  of  mining  camps 
and  sold  his  oil  '*to  arrive."  Through  an  oversight  the 
shipment  failed  to  make  the  boat,  and  when  the  oil  did 
arrive  the  dealer  refused  to  accept  it,  saying  that,  in 
order  to  satisfy  his  customers  it  had  been  necessary  for 
him  to  buy  elsewhere  in  the  meantime. 

An  India  house  ordered  a  shipment  of  white  oil,  speci- 
fying that  it  must  be  odorless  and  colorless  and  stating 
that  it  was  to  be  used  in  making  hair  oil.  The  Noonan 
Company  bought  oil  of  the  specified  grade  direct  from 
its  American  manufacturer.  The  oil  w^as  shipped,  ac- 
cepted, and  paid  for.  A  few  months  later  the  order  was 
repeated  for  the  same  amount  but  the  Noonan  Cornpany, 
unable  to  secure  oil  of  the  proper  grade,  cabled  its  repre- 
sentative in   India   asking   if   oil   of   a   slightly   higher 


DELIVERY    OF    EXPORT    ORDERS  579 

specific  gravity  would  be  satisfactory.  The  customer  in 
India  cabled  that  this  oil  would  be  satisfactory,  but  later, 
when  the  shipment  arrived  on  a  falling  market,  the  mer- 
chant refused  to  accept  the  oil  claiming  that  it  was  not 
odorless  and  colorless,  and  was  entirely  unsatisfactory 
for  use  in  food  products.  Since  the  second  order  had 
not  been  bought  on  the  terms  of  odorless  and  colorless 
there  was  a  misunderstanding  between  the  company  and 
its  customer  as  to  the  specifications.  Since  there  was  no 
notice  to  the  contrary  the  company  had  assumed  that  this 
lot  was  also  to  be  used  in  the  preparation  of  hair  oil.  Had 
the  company  taken  the  trouble  to  have  the  order  and  its 
specifications  verified,  this  difficulty  might  have  been 
avoided. 

In  shipping  its  goods  c.  i.  f.  the  Noonan  Company 
usually  secures  a  blanket  insurance  policy  for  a  large 
number  of  shipments.  When  a  shipment  is  to  be  made 
the  firm  informs  the  insurance  company  that  it  wall  apply 
against  this  policy,  and  a  certificate  is  accordingly  made 
out  by  the  latter  showing  that  this  lot  of  goods  has  been 
insured.  The  company  has  found  that  covering  its  ship- 
ment with  blanket  insurance  is  more  prompt,  frequently 
saves  trouble,  and  is  sometimes  cheaper.  A  large  ship- 
ment of  high-grade  machine  oil  which  was  recently  sent 
to  Australia  arrived  on  a  falling  market  and  was  rejected 
by  the  customer  because  the  company  had  not  taken  out 
an  insurance  policy  when  the  documents  called  for  a 
c.  i.  f.  sale.  The  English  courts  had  held  that  in  order  to 
fulfill  the  requirements  of  a  c.  i.  f.  sale  a  certificate  on  a 
blanket  insurance  policy  was  not  enough,  and  that  an 
individual  insurance  poHcy  must  be  made  out. 

It  has  been  suggested  that  all  foreign  orders  should 
pass  through  the  hands  of  an  inspector  to  mark  wdth  a 
red  pencil  any  particular  point  that  should  be  noted  in 
handling  the  shipment.  This  man  must  be  an  expert, 
versed  in  the  latest  custom  requirements  and  laws  of  the 
different  countries.    Since  a  large  part  of  the  orders  are 


580    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

merely  routine,  it  would  be  necessary  for  him  to  pay 
particular  attention  only  to  the  exceptional  cases,  which 
he  should  have  sufficient  time  to  do. 

What  step  should  the  Noonan  Export  Company  take 
to  avoid  similar  mistakes  in  the  handling  of  its  foreign 
orders  ? 


Problem  150 
Fales  Tire  Patch  Company — Filling  Foreign  Orders 

The  Fales  Tire  Patch  Company  is  a  small  manufactur- 
ing firm  located  in  a  town  a  short  distance  from  Kansas 
City,  Missouri.  It  was  started  originally  to  manufac- 
ture bicycle  tire  patches  and  rubber  cement  for  repairing 
small  punctures,  but  as  the  automobile  industry  devel- 
oped the  company  began  making  patches  for  automobile 
and  motor  cycle  tires.  Locally  the  Fales  Company  has  a 
reputation  for  producing  a  high  quality  product,  but  its 
tire  patches  are  not  sold  to  any  great  extent  outside  of 
a  100-mile  radius  of  Kansas  City. 

Within  the  past  year  the  sales  of  the  Fales  Tire  Patch 
Company  have  fallen  off  because  of  poor  business  con- 
ditions in  the  local  territory  and  the  increased  competi- 
tion of  large  manufacturers.  Several  months  ago  the 
company  began  losing  money  and  most  of  its  working 
force  was  laid  off.  During  this  period,  when  the  com- 
pany was  having  difficulty  in  meeting  its  current  obliga- 
tions, Mr.  Fales  had  a  call  from  an  old  friend  who  was 
selling  foreign  advertising.  This  friend  stated  that  the 
only  hope  of  American  manufacturers  today  was  to 
increase  the  size  of  tlieii'  markets  by  entering  foreign 
trade  and  that  in  securing  foreign  orders  advertising 
was  the  quickest  and  most  important  means.  He  cited 
several  examples  of  large  companies  who  had  made  sub- 
stantial profits  in  this  field.     Partly  because  he  hoped 


DELIVERY    OF    EXPORT    ORDERS  681 

that  foreign  advertising  might  be  a  solution  of  his  diffi- 
culty, and  partly  because  he  saw  no  other  way  of  get- 
ting rid  of  his  friend,  Mr.  Fales  took  a  small  amount  of 
advertising  space  in  several  foreign  magazines. 

After  placing  this  advertising  Mr.  Fales  promptly  for- 
got the  transaction  until  some  three  or  four  months 
later,  when  he  began  to  receive  a  few  scattered  orders 
from  Trujillo,  Honduras;  Champerico,  Guatemala;  Pun- 
tarenas,  Costa  Rica;  Barranquilla,  Colombia.  A  few 
weeks  later  further  orders  came  in  from  a  company  in 
Sumatra  and  from  Surabaya,  Java,  and  several  other 
foreign  cities.  Mr.  Fales  had  never  heard  of  most  of 
these  places  and  since  many  of  the  orders  and  inquiries 
were  written  in  Spanish,  Dutch,  or  some  other  foreign 
language,  he  was  at  a  loss  as  to  what  he  should  do.  He 
finally  consulted  his  local  banker,  who  was  equally  at 
sea.  AVhen  asked  for  a  loan  to  carry  on  this  foreign  busi- 
ness, the  latter  said  that  he  was  perfectly  willing  to 
loan  money  on  good  farming  land  or  for  the  building  up 
of  sound  business  in  the  United  States,  but  he  did  not 
care  to  get  mixed  up  with  any  foreigners.  The  banker 
advised  Mr.  Fales  to  forget  these  foreign  orders  and 
concentrate  his  efforts  on  winning  back  his  hold  on  the 
local  market. 

The  company,  however,  is  in  need  of  orders  to  liqui- 
date its  stock  and  meet  expenses,  and  Mr.  Fales  wants  to 
be  progressive  and  extend  his  business.  The  main  diffi- 
culty is  that  he  has  had  no  experience  in  foreign  trade 
and  he  is  therefore  uncertain  as  to  the  steps  to  be  taken 
in  filling  these  foreign  orders.  In  fact  he  is  somewhat 
inclined  to  think  that  on  the  whole  it  might  be  better  to 
stay  out  of  the  foreign  field  entirely. 


582    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  151 

Page  Export  Corporation — Establishment  of  New  York 

Warehouse 

A  number  of  complaints  on  delayed  shipments  have 
been  received  by  the  Page  Export  Corporation.  This 
company  exports  on  a  commission  basis  valves,  pipe 
fittings,  threading  tools,  packing  and  other  steam  spe- 
cialties manufactured  by  five  different  companies  in  the 
United  States.  Orders  that  are  received  by  the  Page 
company's  salesmen  are  turned  over  to  the  manufac- 
turers who  look  up  the  credit  rating  of  the  customers, 
bill  and  ship  the  goods,  and  make  collections.  Often 
these  factories  do  not  have  merchandise  on  hand  when 
the  order  is  received,  or  they  give  priority  to  domestic 
shipments.  As  a  result  foreign  orders  are  delayed  and 
the  promises  of  the  salesman  of  the  export  company  do 
not  materialize. 

The  Page  Company  has  taken  up  this  matter  of  service 
with  the  manufacturers,  but  no  marked  improvement  has 
followed  and  complaints  continue  to  be  made.  In  highly 
competitive  fields,  particularly  in  Europe  and  South 
America,  this  inferior  service  has  been  sufficient  to  cause 
the  customers  to  give  their  orders  to  other  firms.  The 
Page  Corporation  is,  therefore,  considering  the  advisa- 
bility of  establishing  a  warehouse  in  New  York  City  to 
carry  the  most  active  lines  of  merchandise  and  to  take 
care  of  billing  and  shipping  the  goods,  so  that  better 
service  can  be  rendered  foreign  customers. 

The  cost  of  warehousing  merchandise  in  New  York 
would  be  almost  twice  what  it  would  be  at  the  factory 
and  the  manufacturers  would  be  required  to  stand  this 
additional  expense.  Tt  is  probable  that  they  would  agree 
to  such  a  step,  since  this  ex))ense  would  be  offset  to  a 
considerable  extent  by  a  saving  in  transportation 
charges  thi'ougli  carload  shipments  from  the  factories  to 
the  warehouse.  Also,  there  would  be  considerable  sav- 
ing by  concentrating  shipments  going  abroad,  since  less 
than  ton  lots  c&nnot  be  shipped  profitably.    As  all  prices 


DELIVERY    OF    EXPORT    ORDERS  583 

are  quoted  f.  o.  b.  steamer  at  New  York,  both  the  man- 
ufacturer and  the  customer  would  share  in  this  saving. 

With  a  warehouse  in  New  York  handling  the  most 
active  lines  of  merchandise,  goods  in  general  demand 
would  be  actually  in  stock  and  conveniently  located  ^vith 
respect  to  steamship  company  docks.  Stocks  in  the  indi- 
vidual factories  might  be  allowed  to  run  out  through  fail- 
ure to  appreciate  the  importance  of  filling  foreign  orders 
promptly,  but  in  the  warehouse  of  the  Page  Export  Cor- 
poration a  balance  of  stores  system  would  be  kept  so 
that  an  adequate  amount  of  stock  would  be  on  hand  to 
meet  normal  demands.  The  prompt  shipments  which 
would  result  through  the  establishment  of  such  a  ware- 
house would  lessen  the  number  of  complaints  received 
from  customers  and  would  enable  the  firm  to  compete 
with  foreign  manufacturers  on  a  service  as  well  as  a 
price  basis. 

It  is  contemplated  that  the  rate  of  commission  would 
remain  the  same,  since  it  is  doubtful  if  the  manufacturers 
would  agree  to  an  increase.  The  export  corporation 
must,  therefore,  carry  on  the  billing  and  shipping  work 
now  being  done  by  the  individual  manufacturers  and 
since  it  fills  the  orders,  it  must  also  pass  on  the  ques- 
tion of  credit  and  the  handling  of  collections.  To  do 
this  it  would  be  necessary  to  have  the  manufacturers 
agree  on  a  uniform  credit  and  collection  policy.  This 
additional  amount  of  work  which  would  be  assumed  by 
the  Page  Company  would  cut  its  present  profits  almost 
in  half,  but  by  establishing  a  warehouse  it  is  hoped  that 
exports  will  be  at  least  doubled  through  more  efficient 
service. 

Should  the  Page  Export  Corporation  establish  a  ware- 
house in  New  York? 


584    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  152 

Ellwood  Company — Bargaining  for  Ocean  Freight  and 
Insurance* 

Steamship  companies  do  not  maintain  the  same  freight 
rates  at  all  times.  When  there  is  more  trade  than  there 
are  bottoms  to  carry  it,  the  established  market  rate  gov- 
erns in  almost  every  case.  Wlien  the  cargo  space  is 
greater  than  the  amount  of  freight  to  be  sent  the  com- 
panies frequently  cut  rates  in  order  to  secure  the  busi- 
ness. An  exporting  firm,  therefore,  is  sometimes  in  a 
position  to  bargain  for  freight  rates  and  a  number  of 
these  concerns  shop  around  among  the  transportation 
companies  before  assigning  a  shipment. 

The  shipments  of  wall  board  of  the  Ellwood  Company 
are  not  large,  although  it  has  customers  in  many  sections 
of  South  America  and  ships  also  to  the  AVest  Indies, 
Mexico,  and  Australia.  Since  the  Ellwood  Company  sells 
wall  board  f.  o.  b.  New  York,  it  must  place  a  shipment 
aboard  the  steamer  at  New  York,  the  traffic  manager 
assigning  each  shipment  to  a  particular  ship.  Salesmen 
report  that  customers  are  principally  concerned  with  se- 
curing prom.pt  deliveries  and  having  their  shipments 
sent  at  the  lowest  possible  freight  rates. 

In  the  past,  when  the  company  has  had  a  large  ship- 
ment to  send  to  a  distant  point,  it  has  shopped  among  the 
steamship  companies  by  telegram.  For  example,  a  short 
time  ago  when  it  had  three  carloads  of  wall  board  to  be 
sent  to  Australia  it  was  able  to  secure  a  reduction  in 
freight  rates  of  almost  $1,500.  This  instance  is  extreme, 
but  the  company  has  found  that  if  it  will  guarantee 
freight  one  month  in  advance  to  go  on  a  certain  vessel, 

*  There  are  innumerable  references  to  be  given  on  ocean  shipping,  many 
of  Avliich  deal  in  one  way  or  another  with  the  subject  of  ocean  freight 
rates;  see  De  Haas,  Forpign  Trade  and  Shipping,  Part  11,  Chaps.  I  &  II; 
Hougli,  Ocean  Traffic  and  Trade ;  MacElwee  &  Taylor,  Wharf  Management 
and  Stevedoring ;  Johnson,  Ocean  and  Inland  Water  Transportation ;  Hueb- 
ner.  Ocean  Steamship  Traffic  Management ;  Hooper  and  Graham,  Import  and 
Export  Trade;  Winter,  Marvne  Insurance ;  Its  Principles  and  Practice, 
Chaps.  3  and  4;  Dudeney,  The  Exporter's  Handbook  and  Glossary,  Chaps. 
XXXI-XXXIII;  Guaranty  Trust  Company,  N.  Y.  C,  Shipping's  Share  in 
Foreign  Trade;  Fundamentals  of  Ocean  Transportation, 


DELIVERY    OF    EXPORT    ORDERS  585 

agreeing  to  pay  for  the  space  whether  used  or  not,  a  sav- 
ing of  $100  to  $200  on  carload  lots  to  Australia  can  be 
made. 

When  the  traffic  manager  goes  to  New  York  to  arrange 
for  large  shipments  he  calls  on  steamship  companies 
with  the  following  statement: 

"We  have  two  carloads  of  goods  of  such  and  such 
weight  and  dimensions.  We  have  made  our  customers 
a  particularly  low  price  in  order  to  secure  the  order 
and  we  are  not  in  position  to  pay  the  prevailing  rate. 
We  guarantee  to  have  this  freight  on  the  dock  ready  for 
shipment  three  weeks  from  today.  The  lowest  rate 
offered  by  any  steamship  company  gets  the  business. 
What  price  can  you  make?" 

Customers  appreciate  such  a  saving  and  it  is  proposed 
to  establish  an  agent  in  New  York  who  will  bargain  with 
the  steamship  companies  for  each  shipment.  Salesmen 
say  that  such  an  arrangement  would  be  a  help  in  selling 
merchandise,  since  they  could  inform  the  customer  that 
their  company  had  an  agent  in  New  York  who  would  se- 
cure the  lowest  freight  rates  and  would  assure  them  of 
prompt  delivery. 

Bargaining  with  the  steamship  companies  is  somewhat 
analogous  to  the  conditions  that  formerly  existed  among 
the  railroads  when  uniform  rates  were  not  maintained 
and  rebates  were  frequently  given.  Furthermore,  al- 
though the  company  might  save  a  customer  $200  or  $300 
on  a  freight  bill  in  one  instance,  it  might  not  be  so  for- 
tunate in  the  future  when  the  amount  of  freight  exceeded 
the  cargo  space.  If  the  salesman  explained  to  a  customer 
that  the  company  was  looking  after  his  interests  and 
would  secure  the  lowest  rates  obtainable,  a  customer 
might  become  dissatisfied  if  low  rates  were  not  forth- 
coming and  in  the  future  would  do  business  with  competi- 
tors. 

Should  the  Ellwood  Company  establish  a  policy  of  bar- 
gaining for  freight  rates  for  its  customers? 

The  proposal  has  been  made  to  locate  a  representative 
of  the  company  permanently  in  New  York,  whose  duties 
would  be  to  negotiate  for  freight  as  well  as  for  marine 


686    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

insurance.*  While  marine  insurance  rates  do  not  fluc- 
tuate within  so  wide  range  as  freight  rates,  there  is  some- 
times the  possibiHty  of  consulting  the  various  insurance 
brokers  and  insurance  companies  and  getting  rates  which 
might  result  in  savings. 

Problem  153 

Diamond  Alkali  Export  Corporation  b.  Fl.  Bourgeois — 
Bills  of  Lading  and  Insurance  Certificates** 

The  ruling  of  Justice  McGardie,  of  the  Kings  Bench 
Division,  London,  in  the  case  of  the  Diamond  Alkali 
Export  Corporation  vs.  Bourgeois,  July  1,  1921,  is  of 
great  importance  to  American  shippers  and  has  aroused 
considerable  comment.  The  text  of  the  judgment, 
which  is  published  in  Law  Reports,  1921,  3  Kings  Bench 
Division,  pages  443  to  458,  is  substantially  as  given 
below : 

By  a  written  contract  of  August  7,  1920,  the  Diamond 
Alkali  Export  Corporation  of  New  York  sold  to  F.  Bour- 
geois, of  London,  50  tons  of  soda  ash.  Shipment  was  to 
be  September-October  from  American  seaboard.  Terms 
of  payment  were  cash  against  documents  under  confirmed 
bankers  credit  at  London.  Price  was  c.  i.  f.  Goteborg, 
The  contract  contained  (inter  alia)  this  condition: 
**  Seller  not  liable  for  failures  or  delays  in  delivery  due 
to  strikes,  lockouts,  fire,  accident,  embargoes,  stoppage 
of  navigation,  lack  of  transportation,  war  restrictions  or 
seizures  by  any  governmental  agency  or  any  contin- 
gencies whatever  beyond  seller's  control.  In  case  any 
deliveries  are  delayed  owing  to  any  such  contingency, 
the  delayed  shipments  shall  be  made  as  soon  as  possible 
after  such  contingency  has  been  removed  or  such  ship- 
ments may  be  cancelled  at  seller's  option.  Date  of  Bill 
of  Lading  is  to  be  considered  date  of  shipment."  The 
buyers  rejected  the  documents  when  tendered  in  London 
upon  several  grounds,  namely,  (1)  That  the  sellers  had 
not  shipped  the  goods  until  November  8   and  9,   1920. 

•See  note  on  Problem  152  for  references  as  to  marine  insurance, 
**S€C  pages  &29  through  646,  Addenda  M, 


DELIVERY    OF    EXPORT    ORDERS  587 

(2)  That  a  pro])ei'  Bill  of  Lading  was  not  presented. 

(3)  That  a  proper  policy  of  insurance  was  not  pre- 
sented  

Upon  the  whole  I  think  that  the  effect  of  the  clause 
was  to  enable  the  seller  (if  facts  within  the  strike  clause 
prevented  shipment  in  September-October)   to   ship  at 

a  later  date Here  an  express  clause  of  the 

bargain  enables  the  sellers  as  a  matter  of  right  to  ship 
at  a  later  date  than  that  expressed  in  the  earlier  part 
of  the  contract  of  sale.  I  therefore  find  in  favor  of  the 
sellers  on  the  first  objection  of  the  buyers. 

It  thus  becomes  my  duty  to  consider  the  serious  and 
powerfully  argued  contention  of  the  buyers  that  the  doc- 
uments tendered  did  not  conform  to  the  contract.  I  will 
deal  with  these  documents  separately.  I  take  the  first 
what  I  will  call  for  convenience  the  Bill  of  Lading.  That 
document  was  issued  by  the  Swedish  American  Mexico 
Line  Limited  of  Goteborg,  Sweden.  It  is  dated  November 
8, 1920.  It  contains  many  clauses.  The  arguments  before 
me  turned  on  the  earlier  words  of  the  Bill  of  Lading,  and 
those  only  I  set  out.  They  are  these:  "Received  in 
apparent  good  order  and  condition  from  D.  A.  Horan  to 
be  transported  by  the  S.  S.  Anglia  now  lying  in  the  port 
of  Philadelphia  and  bound  for  Goteborg,  Sweden,  wdth 
liberty  to  call  at  any  port  or  ports  in  or  out  of  the  cus- 
tomary route  or  failing  shipment  by  said  steamer  in 
and  upon  a  following  steamer,  280  bags  Denze   Soda. 

Perhaps  I  should  add  that  the  first  of  the  many  clauses 
in  the  Bill  of  Lading  is  this :  "It  is  mutually  agreed  that 
this  shipment  is  subject  to  all  the  terms  and  provisions 
of  and  all  the  exemptions  from  liability  contained  in 
the  Act  of  Congress  of  the  United  States  approved  on 
the  13th  day  of  February,  1893  and  entitled  "An  Act  for 
the  navigation  of  vessels. "  This  Act  of  1893  provides  by 
Section  4  That  it  shall  be  the  duty  of  the  owner  or  own- 
ers, master  or  masters,  or  agent  of  any  vessel  transport- 
ing merchandise  or  property  from  or  between  ports  of  the 
United  States  and  foreign  ports  to  issue  to  shippers  of 
any  lawful  merchandise  a  bill  of  lading  or  shipping  doc- 
ument stating  amongst  other  things,  the  marks  necessary 
for  identification,  number  of  packages  or  quantity,  stat- 


588    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

iiig  wlietlior  it  be  the  carrier's  or  shipper's  weighty  and 
apparent  order  or  condition  of  such  merchandise  or 
property  delivered  to  and  received  by  the  oAvner  master 
or  agent  of  the  vessel  for  transportation,  and  such  docu- 
ment shall  be  prima  facie  evidence  of  the  receipt  of 
the  merchandise  therein  described."  I  call  attention  to 
the  words  * '  Bill  of  Lading  or  shipping  document. ' '  The 
Act  recognizes  that  there  may  be  shipping  documents 
fulfilling  the  requirements  of  the  section  and  yet  not 
bills  of  lading. 

Now  the  buyers  strongly  contend  that  the  document 
here  tendered  was  not  a  Bill  of  Lading  at  all,  and  that  in 
any  event  it  was  not  such  a  bill  of  lading  as  was  required 
by  the  contract.  They  call  attention  to  the  fact  that  the 
document  does  not  acknowledge  the  goods  to  have  been 
actually  placed  on  board.  It  merely  says  that  the  goods 
have  been  received  "to  be  transported  by  the  S.  S. 
**Anglia."  They  further  call  attention  to  the  words  "or 
failing  shipment  by  said  steamer  in  and  upon  a  follow- 
ing steamer."  I  need  scarcely  say  that  I  appreciate  the 
vital  nature  of  the  buyer's  contention  inasmuch  as  the 
form  of  document  now  before  me  is  of  frequent  use  at 
American  ports.  In  order  to  test  the  matter  it  is  nec- 
essary in  the  first  place  to  consider  the  rights  of  a 
buyer  under  a  c.  i.  f.  contract.  The  strike  clause  here  is 
a  mere  accident,  and  does  not  seem  to  affect  the  point 
at  issue.  For  inasmuch  as  the  duty  of  the  vendors  was 
to  ship  as  soon  as  the  contingency  ceased  to  operate 
and  inasmuch  as  they  were  able  to  ship  on  November 
8th,  and  9th,  1920,  it  follows  that  the  time  of  shipment 
under  the  contract  was  that  date. 

What  then  are  a  seller's  duties  and  buyer's  rights  un- 
der a  c.  i,  f.  contract?  They  were  stated  by  Lord  Black- 
burn in  Ireland  S  Livingstone,  (1872),  5  Appeal  (Jases, 
page  395,  at  page  406  where  he  refers  to  a  "bill  of  lad- 
ing." So,  too,  in  the  well-known  judgment  of  Mr.  Jus- 
tice Hamilton  in  Bidell's  case,  1911,  1,  King's  Bench  page 
214,  at  page  221  where  he  says,  "It  follows  that  against 
tender  of  those  documents,  the  bill  of  lading,  invoice  and 


DELIVERY    OF    EXPORT    ORDERS  589 

policy  of  insurance  which  completes  delivery  in  accord- 
ance with  that  agreement  the  buyer  must  be  ready  and 
willing  to  pay  the  price."  So  per  Lord  Justice  Kennedy, 
same  volume  at  page  956,  "How  is  such  a  tender  to  be 
made  of  goods  afloat  under  a  c.  i.  f.  contract?  By  tender 
of  the  Bill  of  Lading  accompanied  in  case  the  goods  have 
been  lost  in  transit  by  the  policy  of  insurance.  The 
Bill  of  Lading  in  law  and  fact  represents  the  goods." 
See  also  Mr.  Justice  Scrutton  in  Landauer  v.  Craven 
1912,  2,  King's  Bench,  94,  at  page  107,  The  latest  state- 
ment is  the  opinion  of  Lord  Birdenhead  in  Johnson  v. 
Taylor  Bros.  S  Co.  1920,  Appeal  Cases  at  page  149  where 
he  says  in  speaking  of  the  duties  of  a  vender  under  a  c.  i. 
f.  contract,  "He  is  bound  in  the  second  place  to  tender 
to  the  purchaser  within  a  reasonable  time  after  shipment 
the  shipping  documents,  for  example  the  bill  of  lading 
and  a  policy  of  insurance  reasonably  covering  the  "value 
of  the  goods."  I  should  mention  also  the  notes  to  Scrut- 
ton &  Mackinnon  on  Charter  parties,  article  59.  If 
then  a  vender  under  an  ordinary  c.  i.  f .  contract  is  bound 
to  tender  a  bill  of  lading,  the  question  next  arising  is: 
What  is  meant  by  a  bill  of  lading  within  such  a  con- 
tract? 

The  contract  decides  the  rights  of  the  buyer.  The 
question  I  feel  is  not  as  to  the  meaning  of  the  phrase 
in  a  particular  Act  of  Parliament  or  as  to  the  possible 
meaning  under  other  forms  of  contract.  Nor  is  it  mate- 
rial that  a  buyer  objects  to  the  document  for  ulterior  mo- 
tives. See  for  example  Lord  Cairns  in  Boives  v.  Shand 
(1877)  2,  Appeal  Cases,  455,  page  465,  and  per  Lord 
Hatherley,  same  volume  at  page  476.  A  buyer,  as  those 
noble  lords  pointed  out,  is  entitled  to  insist  on  the  letter 
of  his  rights.  As  Lord  Hatherley  said  "You  must  bring 
the  buyer  mthin  the  four  corners  of  the  contract."  A 
buyer  moreover  may  have  obvious  business  reasons  for 
so  insisting  as  he  may  have  to  implement  his  owti  bar- 
gain with  rigorous  subvendees.  Now  I  consider  that  the 
phrase  "bill  of  lading"  as  used  with  respect  to  a  c.  i.  f. 
contract  means  a  bill  of  lading  in  the  sense  established 


590     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

by  a  long  line  of  legal  decision.    Unless  this  meaning  be 
given  the  matter  is  thrown  into  confusion. 

In  article  3  of  Scrutton  &  Mackinnon  on  Charter  Par- 
ties and  Bills  of  Lading  is  a  definition  which  says:  **a 
bill  of  lading  is  a  receipt  of  goods  shipped  on  board  a 
ship  signed  by  the  person  who  contracts  to  carry  them 
or  his  agent  and  stating  the  terms  on  which  the  goods 
were  delivered  to  and  received  by  the  ship."  This  state- 
ment suggests  at  once  an  obvious  and  serious  distinc- 
tion between  a  receipt  for  goods  actually  shipped  on 
board  a  particular  ship  and  a  receipt  for  goods  which  are 
at  some  future  time  to  be  shipped  on  board  either  a  par- 
ticular ship  or  an  unnamed  ship  to  follow  her.  This 
business  distinction  and  varying  results  of  the  two  seem 
to  me  to  be  plain.  The  legal  distinction  seems  to  me  to 
be  equally  plain. 

From  the  earliest  times  a  bill  of  lading  was  a  docu- 
ment which  acknowledged  actual  shipment  on  board  a 
particular  ship.  In  Bennett's  History  of  the  Bill  of 
Lading  (Cambridge  Press,  1914)  at  page  8  is  this  pas- 
sage: ''Desjardins  says  that  towards  the  close  of  the 
16th  century  the  use  of  the  Bill  of  Lading  was  wide- 
spread— he  quotes  a  definition  from  Le  Guidon  de  la  mer, 
a  document  of  that  epoch,  which  defines  the  Bill  of  Lad- 
ing as  the  acknowledgment  which  the  master  makes  of 
the  number  and  quality  of  the  goods  loaded  on  Board, 
See  Desjardins'  Traite  de  Droit  Commercial  Maritime, 
Tome  4,  Article  904  (Paris  1885).  It  is  clear  I  may  add 
that  the  Bill  of  Lading  sprang  from  the  ship's  book  of 
lading  which  was  a  document  of  recognized  importance 
showing  the  goods  actually  put  on  board. 

The  famous  case  of  Lickharroiu  v.  Mason,  2,  Term  Re- 
ports, at  page  674,  was  discussed  (1794).  It  decided  that 
bills  of  lading  were  transferable  by  the  custom  of  mer- 
chants. The  finding  of  the  jury  as  to  the  custom  is  set 
out  at  page  684  as  follows:  It  begins  "By  the  custom 
of  merchants  bills  of  lading  expressing  goods  or  mer- 
chandise to  have  been  shipped  by  any  person  or  persons 
to  be  delivered  to  order  or  assigns  have  been  and  are  at 


DELIVERY    OF    EXPORT    ORDERS  591 

any  time  after  such  goods  have  been  or  are  shipped  nego- 
tiable or  transferable  by  the  shipper  or  shippers  of  such 
goods "  etc.  The  word  negotiable  in  that  spe- 
cial verdict  really  means  no  more  than  the  word  'trans- 
ferable" or  "assignable."  See  Scrutton  on  Charter 
Parties  notes,  article  56. 

I  am  not  aware  of  any  decision  which  has  modified 
the  finding  of  the  jury  in  Lickbarrow  v.  Mason  as  to  the 
subject  matter  to  which  alone  the  custom  of  transfer- 
ability applied.  Apparently  that  custom  and  that  cus- 
tom only  was  operative  when  the  Bills  of  Lading  Act, 
1855,  was  passed.  (18  &  19  Vict.  c.  111).  Now  that  act 
expressly  recites  the  custom  found  in  Lickbarrow  v. 
Mason,  and  then  proceeds,  "and  Whereas  it  frequently 
happens  that  the  goods  in  respect  of  which  bills  of  lading 
purport  to  be  signed  have  not  been  laden  on  board. ' '  It 
thus  seems  plain  that  the  Act  was  referring  to  docu- 
ments acknowledging  an  actual  shipment  on  board  a 
specified  ship.  I  need  not  refer  to  sections  1  and  2  of 
the  Act.  But  section  3  says,  "Every  bill  of  lading  in 
the  hands  of  a  consignee  or  endorsee  for  valuable  con- 
sideration representing  goods  to  have  been  shipped  on 
board  a  vessel  shall  be  conclusive  evidence  of  such  ship- 
ment as  against  the  master  or  other  persons  signing  the 

same "  etc.     It  seems  that  no  assignee  can 

invoke  the  benefits  for  example  of  section  3  unless  the 
document  actually  asserts  the  goods  have  been  shipped 
on  board.  The  whole  point  of  the  section  seems  to  go 
if  the  document  does  not  contain  such  an  assertion.  I 
will  refer  to  this  Act  later. 

Now  in  Blackburn  on  Sale,  3rd  edition  (1909),  page 
421,  is  this  statement:  "A  bill  of  lading  is  a  writing 
signed  on  behalf  of  the  owner  of  the  ship  in  which  goods 
are  embarked  acknowledging  the  receipt  of  the  goods  and 
undertaking  to  deliver  them  at  the  end  of  the  voyage 
(subject  to  such  conditions  as  may  be  mentioned  in  the 
bill  of  lading).  The  common  type  of  a  bill  of  lading 
is  given  in  Carver  on  Carriage  by  Sea,  6th  Edition,  part 
54.    It  is  worthv  of  observation  that  in  the  U.  S.  A.  case 


r)92    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

of  Roivley  v.  Bigeloiv  (1882)  12,  Pick,  307,  Chief  Justice 
Shaw  said:  ''The  bill  of  lading  acknowledges  the  goods 
to  be  on  board  and  regularly  the  goods  ought  to 
be  on  board  before  the  bill  of  lading  is  signed."  See 
the  note  in  Parson  on  Shipping  (Boston)  Vol.  1  page 
187,  where  the  learned  author  somewhat  pointedly  says : 
'*It  is  a  fraud  on  the  part  of  the  Master  to  sign  the  bills 
before  the  goods  are  on  board."  In  Benjamin  on  sale, 
6th  Edition,  page  846,  is  this  passage  giving  the  result 
of  the  cases.  "When  delivery  is  to  be  made  by  a  bill 
of  lading  the  rule  is  that  the  seller  makes  a  good  de- 
livery if  he  forward  to  the  buyer,  as  soon  as  he  rea- 
sonably can,  after  the  shipment  a  bill  of  lading  where- 
under,the  buyer  can  obtain  delivery,  duly  indorsed,  ef- 
fectual to  pass  the  property  or  the  goods,  made  out  in 
terms  consistent  with  the  contract  of  sale,  and  purport- 
ing to  represent  goods  in  accordance  Avith  the  contract 
and  which  are  in  fact  in  accordance  therewith."  Apart 
from  any  authority  to  the  contrary  it  seems  to  me  that 
I  must  hold  that  the  document  here  is  not  a  bill  of  lading 
within  the  c.  i.  f.  contract  before  me.  It  does  not  ac- 
knowledge the  goods  to  be  on  board  a  specific  ship  nor 
does  it  acknowledge  a  shipment  on  board  at  all.  It  leaves 
it  uncertain  as  to  whether  the  goods  mil  come  by  the 
''Anglia  or  some  following  ship.  The  word  "following" 
is  loose  and  ambiguous  in  itself.  The  document  does 
not  even  say  "immediately  following"  nor  does  it  indi- 
cate that  the  following  ship  will  belong  to  or  be  under 
the  control  of  the  person  who  issues  the  bill  of  lading. 
The  document  seems  to  me  to  be  (in  substance)  a  mere 
receipt  for  goods  which  at  some  future  time  and  by 
some  uncertain  vessel  are  to  be  shipped.  It  is  not 
even  in  the  form  of  the  New  York  Produce  Exchange 
bill  of  lading  set  out  in  Carver,  6th  Edition,  app.  A.,  page 
971.  The  buyer  is  left  in  doubt  as  to  actual  shipment 
and  actual  ship.  The  sellers,  however,  submit  that  I 
am  bound  by  the  opinion  of  the  Privy  Council  in  "The 
Marlborough  Hill  v.  Coivan  S  Sons"  1921,  I.  A.  C.  444. 
The  buyers  on  the  other  hand  contend  that  that  opinion  is 


DELIVERY    OF    EXPORT    ORDERS  593 

erroneous  and  that  1  ought  not  to  follow  it.  I  need  not 
scarcely  state  the  deep  diffidence  and  embarrassment  I 
feel  in  discussing  that  weighty  opinion.  As  Lord  Philli- 
more  himself,  however,  pointed  out  in  Dulieiv  v.  White, 
1901,  2,  King's  Bench,  669,  at  page  683,  a  Privy  Council 
advice  is  not  binding  on  the  King's  Bench  Division  even 
as  to  the  "res  decisa."  I  wish  to  point  out  first  that 
the  actual  decision  in  that  case  was  merely  that  the  bill 
of  lading  there  in  question  (which  closely  resembles  the 
one  now  before  me)  fell  within  section  6  of  the  Admiralty 
Court  Act,  1865.  It  may  be  that  the  phrase  "Bill  of 
lading"  in  that  section  permits  of  a  broad  interpreta- 
tion. I  point  out  next  that  there  is  no  express  statement 
in  the  Marlborough  Hill  case,  that  the  document  there  in 
question  actually  fell  within  the  Bills  of  Lading  Act, 
1855.  In  the  third  place  it  seems  to  me  to  be  clear  that 
the  Board  did  not  consider  the  nature  and  effect  of  an 
ordinary  c.  i.  f .  contract  of  the  decisions  thereon  in  rela- 
tion to  the  question  before  them.  The  case  of  Bowes  v. 
Shand,  1877,  2,  Appeal  Cases,  455,  was  not  even  cited  to 
the  Board.  Lord  Phillimore  in  reading  the  advice  of  the 
Privy  Council,  said  (page  451)  "There  can  be  no  differ- 
ence in  principle  between  the  owner  master,  or  agent 
acknowledging  that  he  has  received  goods  on  his  wharf 
or  allotted  portion  of  quay  or  his  storehouse  awaiting 
shipment  and  his  acknowledging  that  the  goods  have 
been  actuallj^  put  over  the  ship's  rail."  With  the  deep- 
est respect  I  venture  to  think  that  there  is  a  great  differ- 
ence between  the  two,  both  from  a  legal  and  business 
point  of  view.  Those  differences  seem  to  me  clear.  I 
need  not  state  them.  If  the  view  of  the  Privy  Council 
is  carried  to  its  logical  conclusion,  a  mere  receipt  for 
goods  at  a  dock  warehouse  for  shipment  might  well  be 
called  a  bill  of  lading.  At  page  452  of  the  Report  the 
Board  saj's:  "Then  as  regards  the  obligation  to  carry 
either  by  the  named  ship  or  by  some  other  vessel,  it  is 
a  contract  w^hich  both  parties  may  well  find  it  convenient 
to  enter  into  and  accept.  The  liberty  to  tranship  is  an- 
cient and  well  established,  and  does  not  derogate  from 


594    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  nature  of  a  bill  of  lading  and  if  the  contract  begin 
when  the  goods  are  received  on  the  wharf,  substitution 
does  not  differ  in  principle  from  trans-shipment."  I  do 
not  pause  to  analyze  these  words.  I  only  say  that  in  my 
own  humble  view  substitution  and  the  right  of  trans- 
shipment are  distinct  things,  and  rest  on  different  prin- 
ciples. The  passage  last  cited  can,  I  think,  have  no 
apphcation  at  all  to  a  c.  i.  f.  contract  which  provides 
for  a  specific  date  of  shipment.  It  will  suffice  if  I  say 
two  things.  First,  that  in  my  view  the  Marlborough 
Hill  case  does  not  apply  to  a  c.  i.  f.  contract  such  as 
that  now  before  me.  Secondly,  that  grounds  for  chal- 
lenging the  dicta  of  the  Privy  Council  will  be  found  in 
Article  22,  and  the  notes  and  cases  there  cited,  in  Scrut- 
ton  &  MacKinnon,  10th  Edition,  as  to  what  are  called 
through  bills  of  lading,  in  the  lucid  article  in  the  Law 
Quarterly  Review  of  October,  1889,  Vol.  5,  page  424,  by 
Mr.  Bateson,  K.  C. ;  and  of  July,  1890,  Vol.  6,  page  289, 
by  the  late  Mr.  Carver,  and  in  Carver  on  Carriage,  notes 
to  Article  107.  I  do  not  doubt  that  the  document  before 
me  is  a  ''shipping  document"  within  the  U.  S.  A.  Harter 
Act,  1893.  I  feel  bound  to  hold,  however,  that  it  is  not  a 
bill  of  lading  within  the  c.  i.  f .  contract  of  sale  made  be- 
tween the  present  parties. 

I  now  consider  the  second  document  discussed  before 
me.  The  buyers  contend  that  the  ''Certificate  of  Insur- 
ance" tendered  hj  the  sellers  was  not  a  policy  of  insur- 
ance within  the  c.  i.  f.  contract.  It  is  headed  "Certificate 
of  Insurance."  It  is  No.  767,922.  It  is  issued  by  the 
Fireman's  Fund  Insurance  Company  of  San  Francisco, 
a  well  known  office.  The  substantive  words  are  these: 
"This  is  to  certify  that  on  the  8tli  of  November,  1920, 
this  Company  insured  under  Policy  No.  2,319,  for  D.  A. 
Horan,  $5,790,  on  280  bags,  58  per  cent  dense  soda  ash 
N.  Y.  &  L.  test,  valued  at  sum  insured  shipped  on  board 
of  the  S.  S.  Anglia  and  or  other  steamer  or  steamers  at 
and  from  Philadelphia  to  Goteborg.  And  it  is  hereby 
understood  and  agreed  that  in  case  of  loss,  such  loss  is 
payable  to  the  order  of  the  assured  on  surrender  of  this 
Certificate. 


DELIVERY    OF    EXPORT    ORDERS  595 

''This  certificate  represents  and  takes  the  place  of  the 
policy  and  conveys  all  the  rights  of  the  original  policy 
holder  (for  the  purpose  of  collecting  any  loss  or  claims) 
as  fully  as  if  the  property  was  covered  by  a  special 
policy  direct  to  the  holder  of  this  certificate  and  free 
from  any  liability  for  unpaid  premiums.  Not  valid  un- 
less countersigned  by  A.  A.  Horan  (Signed)  F.  H.  and 
C.  Robson,  ]\Ianagers.  Countersigned  D.  A.  Horan." 
Notice:  "To  conform  with  the  Revenue  Laws  of  Great 
Britain  in  order  to  collect  a  claim  undeF  this  certificate 
it  must  be  stamped  ^\^thin  1 0  days  after  its  receipt  in  the 
United  Kingdom."  On  the  front  of  the  certificate  are 
certain  conditions,  of  which  the  first  is  this:  "This  cer- 
tificate is  subject  to  the  full  terras  of  the  policy  in  re- 
spect of  being  free  from  claim  in  respect  of  capture, 
seizure,  detention,  or  the  consequences  of  hostilities." 
At  the  back  of  the  certificate  are  other  conditions  which 
I  need  not  detail.  Is  this  certificate  a  proper  policy  of 
insurance  within  the  c.  i.  f.  contract  here  made?  I  have 
read,  I  believe,  all  the  cases  on  the  rights  and  obligations 
of  buyer  and  seller  under  c.  i.  f .  contracts  from  Ireland  v. 
Livingstone  in  1872,  Appeal  Cases,  page  396  and  Hickox 
V.  Adam,  1876  Appeal  Cases,  page  344,  to  Johnson  v. 
Taylor  and  others,  1920  Appeal  Cases,  page  144.  Many 
decisions  are  cited  in  Benjamin  on  Sale,  6th  Volume, 
page  850,  and  so  on.  In  all  the  cases  a  "policy  of  insur- 
ance" is  mentioned  as  an  essential  document.  The  law 
is  settled  and  established  and  I  may  point  out  that  in 
BurtJudl  V.  Grimsdale  1906,  11  Commercial  Cases,  page 
280,  it  was  expressly  provided  by  the  contract  that  a 
certificate  of  insurance  might  be  an  alternative  for  an 
actual  policy.  I  ventured  in  Manbre  Saccharine  Co.  v. 
Corn  Products  Com/pany,  1919,  1  King's  Bench,  page 
198,  to  discuss  the  relevant  authorities  including  the 
lucid  judgment  of  Mr.  Justice  Atkin  in  Groom  Ltd.  v. 
Barber,  1915,  1  King's  Bench,  page  316 — a  judgment 
which  I  have  again  most  carefully  read.  It  seems  plain 
that  a  mere  written  statement  by  the  sellers  that  they 
hold  the  buyers  covered  by  insurance  in  respect  of  a 


596    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

specified  policy  of  insurance,  is  not  itself  a  policy  of  in- 
surance within  a  c.  i.  f.  contract.  See  the  Manbre  case, 
1919,  1  King's  Bench,  page  199.  It  seems  plain  also 
that  a  broker's  cover  note  or  an  ordinary  certificate  of 
insurance  are  not  adequate  agreements  within  such  a 
contract.  See  Mr.  Justice  Bailhache  in  Wilson  Holgate  & 
Co.,  1920,  2  King's  Bench  Division. 

Does  the  present  document  fulfill  the  seller's  contrac- 
tual duty?  In  the  Wilson  Ilolr/afe  case,  paragraph  7, 
Mr.  Justice  Dailhache  said :  * '  It  must  be  borne  in  mind 
that  in  dealing  with  certificates  of  insurance  I  am  not 
referring  to  American  certificates  of  insurance  which 
stand  on  a  different  footing  and  are  equivalent  to  policies 
being  accepted  in  this  country  as  policies."  It  will  be 
observed  that  Mr.  Justice  Bailhache  used  the  word  ''ac- 
cepted" and  not  the  words  ''bound  to  accept."  The 
sellers  here  rely  on  that  passage  and  also  on  the  notes 
to  Scrutton  on  Charter  Parties,  10th  Edition  at  page  185, 
where  it  is  said:  "A  certificate  of  insurance  issued  by 
an  insurance  company  under  a  floating  policy  upon  which 
document  the  Company  can  be  sued  would  suffice  in  any 
case."  The  buyer  strongly  challenges  that  view  and  his 
Counsel  require  me  to  express  an  independent  opinion 
on  the  point.  I  do  so  mth  the  greatest  diffidence  and 
reluctance  in  view  of  the  weight  carried  by  even  the 
dicta  of  such  experienced  and  distinguished  Judges  as 
Mr.  Justice  Scrutton  and  Mr.  Justice  Bailhache.  I  feel 
bound  to  express  my  view  not  upon  a  question  of  busi- 
ness convenience  but  upon  the  strict  law  of  the  matter. 
I  assume  that  this  document  (which  is  not  stamped)  was 
given  under  a  floating  policy  issued  by  the  Insurance 
Company  to  D.  A.  Horan.  Now  the  certificate  is  not 
a  policy.  It  does  not  purport  to  be  a  policy.  This  is 
conceded  by  Mr.  Hastings  in  his  able  argument  for  the 
sellers.  It  is  a  certificate  that  a  policy  was  issued  to 
D.  A.  Horan,  and  it  incorporates  the  terms  of  that  policy. 
These  terms  I  do  not  know  nor  is  there  anything  before 
me  to  indicate  that  the  buyers  know  them.  The  certifi- 
cate does  not  show  whether  that  policy  was  in  a  recog- 


DELIVERY    OF    EXPORT    ORDERS  597 

nized  or  usual  form  or  not.     The  certificate  does  there- 
fore contain  all  the  terms  of  the  insurance.    Those  terms 
have  to  be  sought  for  in  two  documents,  namely,  the 
original  policy  and   the   certificate.     But   even   if  this 
document  is  not  a  policy  yet  the  sellers  say  it  is  equiva- 
lent to  a  policy.     In  connection  \\dth  that  phrase  it  is 
well  to  quote  from  another  part  of  the  judgment  of  Mr. 
Justice  Bailhache  in  the  Wilson  Holgate  Case,  1920,  2 
King's  Bench  at  page  9.    He  there  says,  ''He,  the  buj'er 
cannot  be  compelled  to  take  a  document  which  is  some- 
thing Hke  that  which  he  has  agreed  to  take.    He  is  entitled 
to  have  a  document  of  the  very  kind  which  he  has  agreed 
to  take  or  at  least  one  which  does  not  differ  from  it  in  any 
material  respect."     This  leads  me  to  ask  whether  the 
document  before  me  differs  in  any  material  respect  from  a 
policy  of  insurance.    To  begin  with,  I  do  not  see  how  the 
buyer  here  could  know  whether  the  document  he  got  was 
of  a  proper  character  (one  he  was  bound  to  accept)  unless 
he  saw  the  original  policy  and  examined  its  conditions, 
whether  usual  or  otherwise.    In  the  next  place  I  feel  that 
a  certificate  of  insurance  falls  within  a  legal  classifica- 
tion, if,  any,  different  to  that  of  a  policy  of  insurance. 
The  latter  is  a  well  known  document  with  clearly  defined 
features.    It  comes  within  definite,  established  and  statu- 
tory legal  rights.  A  certificate,  however,  is  an  ambiguous 
thmg;  it  is  unclassified  and  undefined  by  law;  it  is  not 
even  mentioned  in  Arnould.  No  rules  have  been  laid  do^\^l 
upon  it.   Would  the  buyer  sue  upon  the  certificate  or  upon 
the  original  policy  plus  the  certificate?   If  he  sued  simply 
on  the  certificate  he  could  put  in  a  part  only  of  the  con- 
tract, for  the  other  terms  of  the  contract,'  namely,  the 
conditions  of  the  actual  policy,  would  be  contained  in  a 
document  not  in  his  control  and  to  the  possession  of 
which  he  is  not  entitled.    Thirdly,  I  point  out  that  before 
the  buyer  could  sue  at  all  he  would  have  to  show  that 
he  was  the  assignee  of  the  certificate.    See  Arnould,  sec- 
tion 175-177.    In  what  way  can  he  become  the  assignee  f 


598     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

It  is  vital  to  remember  the  provisions  of  the  Marine  In- 
surance Act,  1906.  Now  the  relevant  statutory  provi- 
sion is  Section  50  (3),  which  says:  *'  A  marine  policy 
may  be  assigned  by  endorsement  thereon  or  in  any  other 
customary  manner. ' '  This  sub-section,  however,  only  ap- 
plies so  far  as  I  can  see  to  that  which  is  an  actual  marine 
policy.  Section  90,  the  interpretation  clause,  says:  "In 
this  act  unless  the  context  or  subject  matter  otherwise 
requires  'policy'  means  a  marine  policy.  The  Act  con- 
tains no  reference  express  or  implied,  to  a  certificate  of 
insurance.  Section  22  says  Subject  to  the  provision  of 
any  Status  a  contract  of  marine  insurance  is  inadmis- 
sible in  evidence  unless  it  is  embodied  in  a  marine  policy 
in  accordance  with  this  Act."  If,  as  is  admitted,  this 
document  be  a  certificate  only  and  not  a  policy  it  there- 
fore seems  not  even  to  be  admissible  in  evidence  before 
me.  If  the  certificate  does  not  fall  within  the  Marine 
Insurance  Act  it  appears  to  be  only  assignable  by  writ- 
ing in  accordance  with  the  provisions  of  the  Judicature 
Act,  1873,  Section  25  (6).  The  certificate  may  have  less 
legal  effect  than  n  slip,  as  to  which  see  Arnould  para- 
graph 34  and  Section  21  of  the  Marine  Insurance  Act. 

I  mention  these  considerations  briefly.  Time  does  not 
permit  to  discuss  them  further  or  to  develop  their  signifi- 
cance or  to  emphasize  the  points  arising  under  Section 
91  to  95  of  the  Stamps  Act,  1891.  In  my  view  the  Act 
of  1906  deals  with  marine  policies  only.  It  does  not,  I 
think,  cover  other  documents,  although  they  may  be  said 
to  be  the  "business  equivalent  of  policies. "  I  do  not  think 
that  the  Act  of  1906  covers  the  document  now  before 
me.  In  my  humble  view  a  document  of  insurance  is  not 
a  good  tender  in  England  under  an  ordinary  c.  i.  f.  con- 
tract unless  it  be  an  actual  policy  and  unless  it  falls 
within  the  provisions  of  the  Marine  Insurance  Act  1906 
as  *to  assignment  and  otherwise.  I  must  therefore  hold 
that  the  buyers  were  entitled  to  reject  the  documents 
upon  the  ground  that  no  proper  bill  of  lading  and  no 
proper  policy  of  insurance  were  tendered  by  the  sellers 
in  conformity  with  the  c.  i.  f.  contract.    I  abstain  from 


DELIVERY    OF    EXPORT    ORDERS  599 

amplifying  this  judgment  by  the  citation  of  other  au- 
thority or  the  mention  of  further  reasons  in  support  of 
the  conclusions  I  have  deemed  it  my  duty  to  state.  It 
may  well  be  that  this  decision  is  disturbing  to  business 
men.  It  is  my  duty,  however,  to  state  my  view  of  the 
law  without  regard  to  mere  questions  of  convenience.  I 
desire  to  add  four  remarks:  (1)  That  there  is  no  finding 
or  evidence  before  me  of  any  course  of  dealing  between 
the  parties:  (2)  That  there  is  no  finding  or  evidence 
before  me  of  any  custom  or  general  usage  which  modifies 
the  long  and  clearly  established  legal  rights  of  a  buyer 
under  a  c.  i.  f.  contract.  If  any  such  custom  or  usage 
be  asserted  then  the  point  can  be  dealt  with  in  some  fu- 
ture action  in  the  commercial  Court.  AVhether  such  an 
assertion  can  be  proved  ma.y  well  be  a  question  of  doubt 
in  view  of  the  matters  appearing  in  the  Manbre  case, 
1919,  1  King's  Bench  at  page  206.  See  too  the  Wilson 
Holgate  Case,  1920,  2  King's  Bench  at  page  8,  where  Mr. 
Justice  Bailhache  said  "I  am  not  satisfied  that  since 
Ireland  V.  Livingstone  was  decided  any  custom  has 
arisen  which  obviates  the  necessity  for  a  tender  by  the 
seller  of  a  policy  of  insurance  if  the  buyer  requires  it." 
(3)  It  may  well  be  that  legislation  is  needed  to  enlarge 
the  operation  of  the  Bills  of  Lading  Act,  1855,  and  the 
Marine  Insurance  Act  1906.  (4)  That  the  difficulties  in- 
dicated in  this  judgment  can  be  easily,  promptly  and  ef- 
fectively met  by  the  insertion  of  appropriate  clauses  in 
c.  i.  f.  contracts. 

For  the  reasons  given  I  find  in  favor  of  the  buyers 
with  the  results  stated  in  the  Award.  The  sellers  must 
pay  the  costs  of  the  proceedings  before  me. 

Appeal  dismissed. 
Solicitors  for  sellers:  Cosmo  Cran  ^  Co. 
Solicitors  for  buyers:      Swepstonc,  Stone,  Barler  ^-  Ellis. 


600     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  154 
The  Starr  Company — Collection  of  Insurance  Claims 

The  Starr  Company  manufactures  a  line  of  high-grade 
confectionery  for  which  it  has  developed  a  very  consid- 
erable market  in  foreign  countries.  However,  consider- 
able difficulty  has  been  experienced  with  respect  to  the 
collection  of  insurance  claims  by  its  customers.  Although 
the  concern  has  an  open  policy  with  a  reputable  insur- 
ance company,  its  customers  have  had  difficulty  in  col- 
lecting claims  for  insurance  and  in  some  cases  they  have 
made  reductions  from  invoice  prices  covering  such  claims. 
An  investigation  of  a  number  of  such  cases  showed  that 
the  customers'  failure  to  collect  damages  was  due  partly 
to  the  fact  that  they  had  failed  to  have  proper  notation 
made  on  bill  of  lading  when  the  goods  were  taken  away 
and  partly  to  the  fact  that  they  did  not  notify  the  proper 
authorities.  In  short,  in  the  majority  of  cases  uncollect- 
ible losses  were  the  result  of  the  failure  of  the  foreign 
customer  to  take  steps  to  place  their  claims  properly. 

The  export  manager  has,  therefore,  decided  to  make 
out  a  set  of  instructions  for  customers  in  recovering 
losses  against  which  insurance  has  been  provided.  What 
should  these  instructions  contain!* 


*See  Addenda  3,  pages  647  through  655. 


DELIVERY    OF    EXPORT    ORDERS  601 

Addenda   1    (see   page   550)  : 

*To  give  an  idea  of  the  operations  to  be  performed  and  the  documents 
to  be  prepared,  the  following  extract  is  taken  from  a  description  of  a 
typical  transaction  as  illustrated  in  The  New  England  Exporter  by  Harry 
R.  Tosdal: 

The  Documentation  of  an  Expoet  Orders 

The  details  of  liandlins;  an  export  order  vary  accord- 
ing to  the  commodity  to  he  exported,  the  internal  system 
of  the  concern,  the  terms  of  payment,  and  the  destination 
of  the  goods,  yet  the  general  steps  in  an  export  trans- 
action are  common  to  most  transactions  and  may  be 
summarized  as  follows: 

(1)  The  Inquiry  from  the  Foreign  Buyer.  This  may  be 
an  inquiry  for  quotation  or  for  further  information.  There  is 
no  standard  form.  Such  inquiries  may  be  developed  by  circu- 
larization,  samples,  advertising,  or  visits  of  salesmen. 

(2)  The  Reply  of  the  Manufacturer  to  the  Inquiry,  giv- 
ing description  of  the  goods  he  wishes  to  sell  with  quotations, 
and  developing  selling  points.  In  all  correspondence  with 
foreign  prospects  or  buyers,  care  should  be  taken  to  make  in- 
formation complete  and  detailed  so  as  to  avoid  delay  and  cable 
expense. 

(3)  The  Order,  which  specifies  the  goods  purchased  and 
methods  of  payment  and  shipment. 

(4)  Credit  Inquiry  and  Replies,  either  to  various  credit 
agencies  or  to  firms  or  banks  to  which  the  buyer  has  referred. 

(5)  Invoicing  and  Billing  so  as  to  conform  to  requirements 
of  foreign  trade  customs  and  laws. 

(6)  Shipment  of  ;the  goods,  including  delivery  of  goods  to 
the  dock,  the  issue  of  the  bill  of  lading,  and  the  provision  for 
insurance  against  loss  in  transit. 

(7)  The  Financing,  including  the  preparation  of  the  draft, 
the  letter  of  instructions,  and  the  collection. 

These  are  the  steps  in  transaction  of  business  with  a 
new  account.  If  the  order  comes  from  a  salesman  sent 
out  by  the  tirm,  the  first  two  steps  are  omitted,  their 
place  being  taken  by  personal  solicitation;  likewise,  the 
fourth  step  of  credit  inquiry  and  reply  will  sometimes 

^The  writer  is  indebted  to  Henry  H.  Morse,  Chief  of  the  Specialties 
Division,  United  States  Department  of  Commerce,  for  the  forms  herewith 
presented. 


602     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

be  omitted  in  the  case  of  concerns  with  wliich  trans- 
actions are  carried  on  currently. 

The  following  pages  trace  a  typical  export  transaction 
from  the  receipt  of  the  order  through  the  shipment  of 
the  goods.  The  Export  Shoe  Company  received  in  Sep- 
tember 1921  an  order  from  the  Gonzales  &  Castillo  Com- 
pany for  18  dozen  pairs  of  shoes  to  be  shipped  October 
15 ;  payment  was  to  be  made  60  days  after  presentation 
of  sight  draft,  documents  to  be  surrendered  upon  ac- 
ceptance. 

The  following'  features  will  be  noticed  in  the  order : 

(1)  The  Usual  Data — names  of  buyer  and  seller,  shipping 
date,  and  statement  of  terms — common  to  both  domestic  and 
export  orders. 

(2)  The  Data  Necessaey  to  Determine  Precisely  the 
Goods  to  be  Shipped — such  as  sample  number,  stock  number, 
last  (stock  and  style),  top,  tip,  sole,  and  heel — with  columns 
for  prices  and  extensions  and  columns  for  quantities  according 
to  size.  Careful  specification  is  necessary  in  order  to  avoid 
delay ;  it  is  not  an  easy  matter  to  secure  additional  information, 
and  consequently  the  order  form  shoukl  be  carefully  drawn  up. 
The  number  of  columns  and  their  headings  will  vary  with  the 
nature  of  the  product.  A  company  selling  a  single  standardized 
product  of  one  size  and  style  is  able  to  dispense  wdth  a  large 
part  of  the  data  needed  in  the  shoe  order  given.  Order  numbers 
and  file  numbers  will,  of  course,  vary  with  the  billing  system 
of  the  concern. 

(3)  Credit  Data.  Since  shoes  are  generally  manufactured 
to  order,  the  company  provides  space  on  its  order  form  for  two 
credit  approvals — the  first  prior  to  production,  and  the  second 
after  production  but  prior  to  shipment.  In  a  period  of  unset- 
tled economic  conditions  it  may  happen  that,  between  the  re- 
ceipt of  the  order  and  the  shipment  date,  considerable  change 
will  take  place  in  the  credit  standing  of  a  particular  concern. 
To  avoid  loss  through  failure  to  check  up  such  changes,  a  second 
approval  is  considered  advisable.  In  the  present  order  as  out- 
lined, the  credit  of  Gonzales  &  Castillo  is  known  through  previ- 
ous dealings  and  the  credit  manager  is  willing  to  pass  the  order 
without  question.  If  the  order  were  received  from  a  firm  con- 
cerning which  there  was  no  satisfactory  information  on  file, 
the  Export  Shoe  Company  would  immediately  upon  receipt  of 
the  order  secure  data  from  one  or  all  of  the  following  sources: 
(a)   the   Boston  banks  with  which   it   does  business;    (b)    the 


DELIVERY    OF    EXPORT    ORDERS  603 

National  Association  of  Manufacturers  (application  for  credit 
information  would  be  made  to  the  credit  office  of  the  Associ- 
ation if  the  firm  were  a  member)  ;  (c)  mercantile  agency  (upon 
forms  provided,  requests  would  be  sent  to  the  mercantile 
agency  office  for  a  special  report)  ;  (d)  National  Association  of 
Credit  Men  (if  the  concern  were  a  member  of  the  Foreign  Credit 
Interchange  Bureau  of  the  National  Association  of  Credit  Men, 
the  request  for  information  would  be  sent  to  the  central  bureau 
upon  specially  prepared  blanks.  The  Bureau  will  forward  the 
request  to  other  members  who  have  had  business  dealings  with 
Gonzales  &  Castillo,  names  of  such  members  being  in  the  gen- 
eral file  maintained  in  the  Bureau)  ;  (e)  firms  to  which  refer- 
ence is  made  in  connection  with  the  order ;  the  National  As- 
sociation of  Credit  Men  has  approved  a  special  form  for  this 
purpose,  having  blanks  for  recording  the  essential  data  con- 
cerning credit  experience  of  a  particular  firm;  (f)  other  sources, 
such  as  tlie  Philadelphia  Commercial  Museum. 

(4)  The  Manner  in  Which  the  Shoes  Are  to  be  Packed  in 
THE  Various  Packing  Cases  thereby  giving  the  number  of  pairs, 
the  style  and  value  of  product  in  each  packing-case.  This  is 
valuable  for  proof  in  case  of  insurance  claims. 

(5)  The  Entries  for  the  Factory  Order  Sheet  Are  in  this 
Case  Made  Directly  from  the  Order,  no  Copying  Being  Nec- 
essary'.  Other  firms  may  find  it  necessary  to  copy  the  order  or 
modify  the  procedure  to  conform  to  the  order-filling  sj='stem  in 
their  concern. 

In  order  to  fill  and  document  the  order  correctly,  more 
detailed  instrnctions  are  given  than  are  given  on  the 
order  sheet.  The  special  instructions  shown  in  Form  25 
on  the  next  page  are  attached. 

Such  instructions  may  also  be  placed  upon  the  invoice, 
but  it  is  evident  that  they  will  vary  according  to  the  firm, 
the  market,  and  the  type  of  commodity.  The  instruction 
given  as  to  insurance  indicates  the  common  practice  of 
insuring  for  10%  to  20%  above  the  invoice  value  of  the 
goods.  If  forwarders  are  to  be  employed,  documents 
for  which  the  manufacturer  is  responsible  are  the  in- 
voice, the  draft,  and  possibly  the  insurance  policy.  In 
this  case,  the  order  is  to  be  handled  by  the  manufacturer, 
deliveries  to  be  made  direct  to  the  steamship  company  in 
Boston. 

Upon  receipt  of  the  order,  a  courteous  letter  is  mailed 
to  Gonzales  &  Castillo  expressing  pleasure  at  the  re- 


604    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


SPECIAL  INSTRUCTIONS  APPLYING  ON 
ATTACHED  EXPORT  ORDER. 


DATE    OCT  15,  1921 

REG  I STER   #  7744     AGEN T     355  E      0 RDER   H  72  SHIPPED    OCT  15,   1921. 

PACKIN G         PACK  IN  WOODEN  CASES,    STRAPPED  /JID   SEALED. 

INSIDE  or  CASES  BE  LINED  WITH  WATER-PROOF  PAPER 


60  DAYS 

BILLING         SIGffl"  PRATT  DOCUMENTS  ATTACHED 10   COPIES  OF   I^A/OICE 


TRAFFIC  DEPT  STEAMSHIP  B/L   IN  TRIPLICATE. 


1   CONSULAR   INVOICE— INSUHANCE   CERTIFICATE    IN  DUPLICATE. 

INSURANCE   —    INSURE   AGAINST  ALL  RISKS. 

ROUTING:  INSURE  FOR  20/=  ABOVE  THE   INVOICE  VALUE 

Via  Forwarder: 


Via  S.   S.   Line 

PASTOR  FRUIT  S.S.    CO. 

Consigned: 

TO  ORDER  OF 

EXPORT   SHOE   CO. 

MARKING  NOTIFY 

GONZALES   &   CASTILLO 
HAVANA 
CUBA 


EXPORT  DEPARTMENT 


FORM  25.    Detailed  Special  Instructions  Form 

ceipt  of  the  order.  This  letter  gives  an  opportunity  for 
introducing  a  personal  touch  and  for  building  good-will, 
an  opportunity  which  a  good  export  manager  will  not 
overlook. 

Prior  to  October  14,  1921  the  manufacturing  depart- 
ment informs  the  export  department  that  the  shoes  on 
the  order  of  Gonzales  &  Castillo  have  been  manufac- 
tured, while  on  that  date  the  packing  department  informs 
the  export  department  likewise  that  the  shoes  have  been 
packed  and  await  shipment.  Meanwhile,  it  has  been 
ascertained  that  the  steamship  Pablo  sails  on  October  15 


DELIVERY    OF    EXPORT    ORDERS 


605 


for  Havana  and  that  the  Pastor  Fruit  Company  will 
accept  the  consignment  of  shoes.  Accordingly,  the  pack- 
ing department  has  been  instructed  to  order  the  goods 
sent  to  the  dock  of  the  Pastor  Fruit  Steamship  Company, 
which  issues  upon  their  receipt  the  common  form  known 
as  the  dock  receipt: 


DOCK  RECEIPT 

THE  PASTOR  FRUIT  COMPANY 

TRIPLICATE 
(FOR  PIER) 

B««onMaBB,       October  14.    1921. 

m 

arkiand  numben-  miltnoi*r,  being  as  d«br 

n  n>  sniptXT  anu  a^i  i^  dc  .j^mea  pin    ot                .ubscqucnl  Meimet                                                                                                                                                   [ 

MARKS 

NUMBERS 

No  of     ;   Ktnd  o( 

'                    1     SHIPPER'S  DECLARATION  OF  CONTENTS 
Packages  i  Packages 

Shipper-i  1      Sltimmc'i      1  Shipper'! 
Vahie     1  Meastiraineni  1     Weight 

To   order   of 

1-3 

3       Casee     lien's  Shoes 

1384.54   cubic 

675 

Export  Shoe  company 

feet 

lbs 

Notify 

Gonzalea  &   Caetlllo 

Havana , 

Cu^a 

COP 

Y      (NOT      NEGOTIABLE) 

u*c  by  ll  (or  Mmilar  shipments  lupon  ihr  bow*  of  which  (rci; 
iuucd  (or  said  cood*  to  ihe  above  namt-d  shiWKt      The  PaMo 
become  rcHMnstble  lot  the  coods  a»  carrier  until  ihc  Roods  are 
until  such  loadine  il  ihall  be  liable  only  lor  ki^  or  damage  vcc 
*n  ordinary  bailee  is  liable  (or.  but  -uh|ci:t  alMi  tu  ihc  cumlil 
tiont  of  liability  and  lalue  conUincd  m  uid  recular  bill  of  lad 

,»"o.l  by  .iWjuli.  such 

in               lender  o(  the  E<wd>  luf  shipmcni  and  the  value  ol  the  sondt  be  dccUred  on  delivery  at  the 
be               dock  and  tniertcd  herein,  (ailinjt  which,  the  sood>  shall  be  conclusively  deemed  receiveil 
nt                subject  to  the  bill  ol  lading  limitation  ol  value  and  habihty  to  the  invoice  cost  not  eicccd 
■r                 ing  SlOO  00  per  pickagc 

as                            Shippers*  sveighls  as  ini^rted  herein  will  be  relied  on  in  handhnjc  the  goods,  and  il 
J                 incorrect,  shipper  and  or  consignee  shall  be  responsible  lor  any  loss  or  damage  tf  camei 

NOTICE                                           1" 
Se«  reverse  side  respecilng 

CARGO  BOOK 
PAGE 

THE  PASTOR  FRUIT  COMPANY 

*""■""*'  "'" 

FORM  25.    Dock  Receipt 


606    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  dock  receipt  is  not  to  be  confused  with  the  bill  of 
lading.  It  is  merely  evidence  that  the  company  has  re- 
ceived the  goods  at  the  pier.  The  Export  Shoe  Company 
has  at  the  same  time  sent  to  the  steamship  company  the 
following  letter  with  the  documents  mentioned,  on  the 
basis  of  which  the  bill  of  lading  is  to  be  issued: 


Oct.  14,  1921. 


The  Pastor  S.  S.  Company, 
Long  Wharf, 
Boaton,  Uaae. 


Attention  Mr.  BlacK 


EnoloBed  please  find  six  copies  of  invoice  in  Spanish  and 
export  declaration  in  duplicate  covering  shipment  of  three  cases  of  ehoe« 
Nob.  1-3  consigned  to  you  and  Tarked;- 

To  order  of 

Export  Shoe  Company, 

Notify 

Gonzales  &  Castillo 

Havana 

Cuba. 

Please  arrange  to  forward  shipment  prepaid  coneigncfd  to  or- 
der of  Export  Shoe  Company,  notify  Gonzales  4  Castillo,  Havana,  Cuba. 
Arrange  for  consulation  of  documents,  clearance,  etc.,  and  send  all  nego- 
tiable documents  to  ub  as  quickly  as  possible.   Also  send  us  a  copy  of 
the  bill-of -lading  for  our  file  together  with  your  bill  of  charges  in  du- 
plicate, for  which  we  will  be  pleased  to  remit  promptly. 

We  give  packing  list  below: 


Caee  No 

Weight                    Kilos 
.     GrosB       Net       Groae       Net       prs.     Measurements              Markings 

1 
2 
3 

220          160        99.550   72.40        72     27*  x   27*  x   40*     To   order   of 
225          165     101.81     74.66        72     27i  x   27*  x   40*     Export  Shoe   Cs . 
230          170      104.07      76.92        72     27*  x  27*  x   40*     Notify  Gonzales 
675          i^                                                     54   cubic    feet        &  Castillo, 

Havana,    Cuba, 

The   value   for   customs   clearance    is   $1364.50   and   the   shipment 
la   insured  under  our   open  policy. 

Yours  very   truly, 

EXPORT   SHOE   COMPANY 

^clAAJQ^'    ^      OKvOCvv^ 

W.-62X-. 

■Enc.                                                               M      Traffic   Manager 

FORM  27.     Letter  of  Instructions 


Just  as  the  United  States  requires  exporters  to  the 
United  States  to  prepare  consular  invoices  without  which 
goods  will  not  be  admitted,  so  many  other  countries  re- 


DELIVERY    OF    EXPORT    ORDERS 


607 


quire  the  preparation  of  consular  invoices.  The  invoice 
mentioned  in  the  letter  on  page  606  is  the  consular  invoice 
form  required  for  shipment  to  Cuba,  the  purpose  of  which 
is  to  secure  for  governmental  authorities  an  authentic 
and  sworn  statement  for  use  in  computing  and  checking 
up  invoice  duties.  The  number  of  copies  required  varies ; 
in  this  particular  case,  six  copies  have  been  prepared. 
The  form  of  the  consular  invoice  is  as  follows : 


CUBAN  CONSULAR  INVOICE 

INVOICE  of  merchandise   ihippcd   hy      PPORT  SH08  CO 

BosTo:;    :iASS 


destined  to_ 


HAVASA      CUBA 


J?epublica  de  Cuba_ 


and  consigned  to  _ 


TO  ORDER  EXPORT   SHOE   CO      NOTIFY  OOMZAUS   h  CASTILLO 


'JENS  SHOFS 
OF  LEATHER 


£16  PR   TOTAL 

60  PR 
45  " 
45  • 
66   * 
2l6   ■ 


COPIES   NOT  NEGOTIABLE 


675 
KILOS 


360  00 
292  50 
270  00 
4  62  00 
1384    50 


Declaro  que  soy  el  dc  |aj  mercancias  relacionadaj  en  la  presenle  fjiclura 

f  que  son  cicrtos  Ids  precioa  y  dcmas  panicuUrei  que  en  ella  se  consignan.  y  que  lai  mercancias  conrenidai  en  dicha 
factura  son  produclos  del  sucio  6  de  la  induslria  de  lo$  Estados  Unidos  de  America. 


a«„^,..,S.i^   THE  MANUFACTURERS 


ECFORT   SHOE  00 


-"^^S^^"^^ft^?-^'^^^'--^ 


Declaro  que  toy  el  Agente  autoriiado  por  qUe  B«  »uscmo  la  anieri 

para  presentai  esia  (actura  en  la  Oficina  Consular  de  Cuba  en  esta  plaza,  4  (in  d*  que  sea  certlficada 


FORM  28.    Consular  Invoice 


608     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


For  the  purpose  of  compiling  statistics  of  export,  the 
United  States  Government  requires  each  shipper  to  pre- 
pare an  export  declaration  in  duplicate  on  forms  sold  by 
the  Government  at  the  rate  of  $2.50  per  thousand.  No 
vessel  can  be  cleared,  without  export  declarations  cover- 
ing the  entire  cargo.  The  face  of  the  export  declaration 
contains  the  sworn  statement  as  to  the  contents  and 
value  of  the  shipment;  on  the  reverse  are  given  the 
instructions  for  the  preparation  of  the  declaration : 


I    -    nil  \M  B\  WMinMKNr                                      ^^^^  Un.l^d  Sl.l«.  Cu.tom.  .nd  W.r  Tr.d.  Butdi 
C..lon«C.I   N.   7525. 

ri„.,„-«i..«R.jtw.,B. 

1  ..,)cN,.   D;u  1      .Purt  t 

OF  MERCHANDISE  SHIPPED  10  FOREIGN  COUNTRIES  OR  NONCONTIGUOUS  IER»1I0«]ES  OF  THE  U.  S. 

Export  Shoe  Co. 

Address 

Boston,   MaBB.                          ^ (....ii .!.,.„,,                       ^^^^     Boeton,   llaeo.                      | 

v:,                   ""'"Freight   "F»r  SMprnpni  on  id..      ""sarPablo     '"'                         '"       * ""'"" 

From      Boston.   "liaBB.                        To  llllin>»lf  for|.i.rn  .lr.!ln»lion           HAVAKA,      CUBA 

1 

^i|^p- 

Jtn'Zi'V«'"~7  v'm^''' -^^^^^^ 

«•„,  t™Jc 

"SiP 

V.,,.e.,„.,..„d  pi...  .,.„,„....          1 

;SI?i: 

impofin) 

1-3 

MLUU 

1384 

50 

3    CS 

^CEN'S    SHOES 

216   PR 

59  6  LBS 

MARKED 

TO   ORDER 

EXPORT    SHOE 

CO. 

GONZALES    4 

CASTILLO 

Havana.    Cul 

a 

"■"'""""■""""■' 

1  mUly  iImI  .,l,.,^.  .Icm„I,.,|  c 1,  „cri  .li.|.|.pJ  ...  -lali-l  l.ir,™  tooiH  ;.s  ullrcn.lw 

ukJ 

CXporlnlinn;    I  furllxr  <l.-.  Ln-  IImI  ii»tir  »f  ll»-  tmn  luiri'lisi-  >li-s.nl.r<l  nl.i.vc-  i«  to  l>c>  liMlcii  on  .inv 
or  Iran^Miippcd  on  l>ic  Ijigli  sca«  cxci-pl  .is  fully  :.tiiu-<I  uUum-.    I  fiirtlKr  (U-clarr  llinl  nonr  »f  sai/l  i 

lies  ;il   tlir  liiiu-  .in<l  pliico  of  s)ii[iincn(  f^r 
llicr  vcsst'l  in  pnrt  llinn  tlml  iiamcrl  nbovc 
cnlinmlisc  in  iliippnl  or  lo  t)r  delivered  in 

tlinl  if  I)i<-  iIiijtiDciit  is  ma<!c  U>  n  l>aiik  or  oIIht  liro 

c.  f.i.Cor.  or  at.cr.l.  Ilml 

i^lh,- 

,s;, ,        EXPOI 

<T   SHOE   CO. 

Oct.    14,    1921 

(Cnriiirilv)                /  >^a»»»yi</   C<1  .   .!><M,->x^^IZ^i^^^~~^                     1 

-V\^~li  T^itiZ^-^^           .                                    ,,p„...            ■^Boston,   Maes. 

"'""''  '"" 1  "  l."U„-, .1.  ,                                      ,  1 ,,. 

FORM  29.    Face  of  Export  Declaration 


DELIVERY    OF    EXPORT    ORDERS 


609 


INSTRUCTIONS. 

Pcetl  carefully  to  avoid  delay  as  shipping  point. 

This  fofm  must  be  prepared  in  quadruplicate  for  all  merchandise  shipped  to  a  forcigrj  destination  except  sliipinfrits 
fn  tnatit  throuKh  the  United  States  from  one  foreign  country  to  another  and  in  duplicate  for  merchandise  shipped 
between  the  United  States  and  its  nonconiieuous  territory.  When  merchandise  is  shipped  foreign,  four  copies  oi  this 
form  m'lat  be  presented  to  the  collector  of  customs  for  each  consignment.  The  collector  w^il  retam  the  original  and  one 
copy  and  daliver  the  other  two  copies  to  the  shipper.  The  shipper  will  present  one  copy  to  the  steamship  company  and 
deliver  the  other  copy  with  the  goods  to  the  inspector,  of  customs  on  the  dock,  without  which  no  goods  will  be  received. 
The  copy  dotivered  to  the  steamship  company  must  accompany  the  goods  on  their  voyage  and  be  delivered  by  the  mas- 
ter to  the  American  Consular  officer  with  the  manifest  at  the  port  of  discharge.  The  copy  delivered  to  the  inspector  o( 
customs  upon  whicn  he  will  make  Iiis  notifications  of  short  shipment,  etc., .must  be  delivered  to  the  vessel  to  be  attached 
to  the  Eianifest  dclivewd  to  the  collector  upon  clearance. 

Export  license  number  and  date  of  expiration  must  appear  immediately  above  goods  shipped  thereunder. 

The  War  Trade  Board  code  number  of  the  article  given  on  the  export  license  must  be  inserted  after  each  commodity 
in  the  column  following  the  description  on  the  face  of  this  form. 

If  goods  are  to  be  delivered  to  other  vessels  in  port  or  transshipped  on  the  high  seas,  the  articles,  quantities  and 
values,  and  name  and  address  of  person,  corporation,  vessel.  Government,  etc..  to  whom  transferred  or  delivered  must  be 
Etaled  en  this  form. 

!.  SHjpraents  from 
the  original  export  declar, 
States  and  its  noncontigui 
exportation,     if  shipped  c 
consigriee  at  the  seaboard, 

(a)  If  the  shipper  prefers,  he  may  place  the  original  declaration,  but  not  the 
addressed  to  the  Collector  of  Customs  with  his  name  indorsed  thereon  and  the  faci 
deliver  it  with  the  extract  to  the  carrier.  If  goods  are  consigned  to  an  agent  at  i 
portaticn  the  shipper  m»y  mail  the  declaration  and  extract  properly  prepared  dlr 

(6)  Upon  arrival  of  the  goods  at  the  port  of  exportation,  the  carrier  must  ir 
tions,  sealed  and  unsealed,  and  the  carrier's  extracts  to  the  Collector  of  Customs 
the  extract  and  return  it  to  the  carrier,  vessel,  or  parly  named  lo  attend  to  exportation. 

2.  Exporting:  vessel  or  carrier. — Care  should  be  exercised  in  receiving  goods  destined  for  foreign 
tiguous  territories  not  accompanied  by  certified' extracts  or  original  declarations,  as  clearance   will  not  be  granted  until 
the  export  deelaraiions  have  been  filed  with  the  Collector.     The  copy  must  be  attached  to  the  vessel's  manifest  or  car 
manifest  or  copy  of  waybill  when  presented  for  clearance. 

3.  Before  a,  clearance  shall  be  granted  for  any  vessel  bound  to  a  foreign  port,  the  owners    shippers,  or  consignors  of 

aniiests  (or  declarations)  of  the  cargo  or  the  parts  thereof  shipped 

Such  manile&t   (or  declarations)   shall  specify  the  kinds    quanti- 
country  of  destination,     (See  sec    4200.  Rev.  Stats..  U.  S.) 
yoyage^without  delivering  manifest  and  obtaining  clearance,  the 
ch  offense.     (See  sec.  4197,  Rev.  Stats., 


points  for  exportation.— If  shipped  on  a  through  bill  of  lading,  the  shipper  mu5t  prepare 
n  quadruphcatc  for  foreign  shipments  and  in  duplicate  for  shipments  between  the  United 
'er  to  accompany  the  shipping  papers  to  the  port  of 
ay  be  attached  thereto  or  mailed  separately  to  the 

Tier's  extract,  in  a  sealed  envelope 
ealing  noted  o 
eaboard  for  ti 

!iately  deliver  the  original  declarar 
the  original  and  certify 


sh.pn 


nt  and  i 


U.  S.) 


el  shall  deli% 
and  shall  ver 

?  articles  and  the  foreign  port  i 
id  to  a  foreign  port  departs  on 
n  in  charge  shall  be  liable  to  a  penally  of  $500  for  < 


before  a  d 
the  shippe 


■  provisions  apply  to  exportations  by  rail,  vchic 
;  shipper  must  prepare  this  export  declaration 


shipn 


officer. 


■  ferry.     (See 
sign  the  four 


^ppe: 


nil  be 


1,  act  March  3.  1893.) 

lies  and  the  oath  be  taken  on  the  original 
ust  be  Signed  by  the  shipper,  but  the  oath 
ihe  declaration  is  executed  by  an  agent  for 
,iic  rtuiiLwiiiy  111U31  UL-  111  willing  uii  mis  uci.i<ii .luuii  ur  uincr  Qocumeni  filed  With  the  Collector,  The  values 
f  shippers  may  be  omitted  from  the  copies  to  be  delivered  to  transportation  company  but 
e  original  and  the  copy  for  use  of  War  Trade  Board.  The  original  is  for  the  use  of  custom- 
'  -fidcntial   and  information    not  disclosed  without  written  authority  of  the  shipper  or  his  agent. 

required  on  the  prescribed  form  must  be  furnishe 


nust    always 


port  statistics  are  compiled  from   these  declaratJc 

5.  Domestic  articles  cj: ported. —The  value  of  all  articles  grown,  produced,  or  manufactured  in  whole  « 
United  Slates  must  be  stated  in  the  column   of  "U    S.   Products." 

6.  Foreign  articles  exported.— The  value  of  articles  of  foreign  origin  shipped  out  of  the  United  States 
condition  as  imported  must  be  stated  in  the  column  of  "Foreign    Products,"      If   foreign   articles   are   subj-^..„ 
process  of  manufacture  or  alteration  in  the  United  States  they  become  United  States  products  and  must  be'rcporrcd^a- 
such.    Thus.    Imported  raw  sugar  refined  in  the  United  States  should  be  reported  as  a  domestic  product 

7.  The  value  of  articles  to  be  slated  is  the  selling  price  cr  the  true  market  value  at  the  time  and  place  of  shipmen 


part  in  the 


:  ^ame 


for  exportai 

8.  Description  of  articles  exported 
machinery,, millinery,  etc.  will  not  be 
tiled,  oleomargarine  whether  colored  < 

S,  The  kind  of  packages  as  boxes. 
la  The  total  quantity  of  each  artic 
etc..  must  b  " 


nust  be 

ccepted.     In  the  c 
r  uncolored,  butter 
arrels.  etc.  and  th. 
:  expressed  in  the  usual 
"    nust  be  stated 


complete.    General  terms  such  as  dry  goods,  groceries, 
of  cheese  the  declaration  must  slate  whether  filled 
hether  pure,  adulterated,  or  renovated, 
elusive  pf  outer 
of  pounds,  ton! 
-.  .  .  -    .     gallons  of  50  per  ccr 

11.  The  coimtry  of. final  destiftation  of  goods— that  is,  the  country  to  which  goods  ai 
care  should  be  exercised  lo  stale  the  final  destination  of  goods  shipped  ihrou'^^h  Canada 
transshipped  in  ihe   United  Kingdom,  the  Neiherlands,  Germany,  and  France  en  route 

12.  Inspection  certificates.— Process  butter  or  butter  adulterated  or  renovated  must  be  accompanied  by  certificate  ol 
purity  issued  by  the  United  States  inspector  of  dairy  products.  Certificate  of  inspection  must  be  presented  to  the  Col- 
lector for  meal  and  meat^  food  products  exporled.when  required  by  the  regulations  of  the  Department  of  Agriculture. 

of  Foreign  and  Domestic  Commerce,  Depart- 


coverings,  must  be  specified. 
;  of  2,^40  pounds,  yards,  galtona, 
t.  alcoholic  strength, 
c  sold— must  be  shown.    Special 

to   Europe,  and  of  goods  to  be 


13.  Export  schedule  B  niav'be  obtained  free  of  charge  fro; 

ent  of  Commerce.  Washin^tot>.  D.  C.  and  will  be  of  much 

14.  Sale  and  printing  of  blanks.— Shippers  export  declarat: 

ice  of  25  cents  per  block  of  100.    The  export  declarations 

rictly  to  the  o^icial  form  in  width,  wording,  color,  and  arrangement. 


sisiancc  to  expon 

IS  may  be  obtained   from  Collectors  of  Customs  at  the 

ay  be  printed  by  private  parties  providing  they  confonu 


To  the  Collector:   I  hereby  author! 


the  exportatiOD  of  the  witMn  described  goods.     Please  deliver  the 


— .  to  act  as  my  agent  for  customs  purposei  i 
tified  duplicate  accordingly. 


FORM  30.    Reverse  of  Export  Declaration 


Tlie  consular  invoice  must  be  signed  by  the  consul 
representing  the  country  of  destination,  a  fee  being 
charged  for  the  forms  and  certification.    The  certification 


610    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

is  secured  by  the  steamship  company.  With  the  export 
documents  and  certified  consular  invoice  prepared,  the 
Pastor  Fruit  Company  makes  out  the  bill  of  lading  in 
the  following  form : 


THE    PASTOR     FRUIT    COMPANY 

WITH   CONT4ECTING   CARRIERS  OR   OTHERWISE 

BILL  OF  LADING 

nfrriUrO    QI    boston.    6yt>M    pastor    TRUIT    company  (the  tern  earner  twrciaalter  used  inl«ilin«  said  Ctmpany  and/or  mj 

utedcrcontinuiDg  Carrier)  trnm  the  shipper  oame^i  on  the  back  herixjl,  th<^  pacKages  or  articles  mL-nlioDcd  on  the  back  hereof  (hereinafter  called  the  Goods),  in 
nt  good  nrdM  nod  cond.uon;  TO  BE  TRANSPORTED  by  the  neamship  ramed  on  the  back  hereof,  or  by  said  Sieamship  and  or  ol\^  cooveyanet-,  subject  to  substituUoo 
other  liberties  as  hercinaftcf  provided  (the  term  Vessel  hereinafter  used  intending  said  steamship  and,  or  any  substituted  or  continuing  vessel  or  craft  ut  the  inception 
equcnt  stage  of  the  entire  service),  direct  or  via  ports  or  places,  lo  the  destination  of  the  Goods  named  on  the  buck  hertof.  or,  if  ihc  final  carrier  be  a  water  carrier,  rtien  r» 
lereloas  the  VLSsel  can  safely  get;  and  at  said  destination  of  the  goods  to  bedclivored  incomplete  or  part  lots,  upon  payment  of  any  unpaid  freight  or  any  other  eunu  paysblv 
ipcr,  ooou^ec  and/or  assifn^  to  the  Consignee  named  on  back  heicci  or  order  if  so  provided,  subject  always,  and  duniig  any  deviation  also,  to  iho 

TERMS  OF  THIS  CONTRACT  WHICH  ARE  HEREBY  MUTUALLY  AGREED  UPON  AS  FOLLOWS: 


1.  The  freight  is  adjusted  in  consideration  of  all  the  terms  and  pro- 
visions of  this  contract  whether  written,  printed,  pasted  or  stamped. 

2.  All  particulars  herein  mentioned  of  the  Goods,  except  only  the  num- 
ber of  the  packages  with  the  marks  thereon,  are  those  declared  by  the 
shipper,  and  the  same  (including  anything  stated  as  to  contents,  size, 
weight,  quantity,  condition,  value,  or  the  like  or  implied  by  the  character 
of  packages  designated)  are  unknown  to  the  Carrier  and  shall  not  consti- 
tute as  against  the  Carrier,  any  part  of  the  Carrier 's  description  of  the 
Goods  as  hereby  received  for,  but  shall  be  deemed  only  representations  of 
the  shipper.  The  Carrier  may  correct  all  errors  in  marks  and  numbers  of 
the  Goods  in  order  to  conform  the  same  to  the  Bill  of  Lading  or  other 
documents. 

3.  The  Goods,  whether  perishable  or  not,  are  accepted  by  the  Carrier 
subject  to  delays  or  failure  in  shipment,  transportation,  delivery  or  other- 
wise, occasioned  by  war,  rebellion,  riots,  strikes,  stoppage  of  labor,  lock- 
outs or  labor  troubles  of  Carrier's  employees  or  others;  shortage  of  labor, 
fuel,  conveyance  or  room;  lack  of  facilities  of  any  sort;  accumulation  of 
cargo ;  weather  or  any  conditions  unless  shown  due  to  Carrier 's  negli- 
gence; and  notice  to  shipper  or  others  of  any  danger  of  such  delay  or 
failure  is  hereby  waived ;  and  the  Carrier  shall  not  be  responsible  for  any 
such  delay  or  failure;  and  if  loading  of  the  Goods  in  the  customary  man- 
ner is  delayed,  or  the  Vessel  is  likely  to  be  detained  slie  may  procepd  with- 
out loading  or  committing  the  loading  of  the  Goods, 

4.  The  Carrier's  responsibility  in  respect  to  the  Goods  as  a  carrier 
shall  not  attach  until  the  Goods  are  actually  loaded  for  transportation  upon 
the  Vessel,  and  shall  terminate,  without  notice,  as  soon  as  the  Goods  leave 
the  Vessel's  tackles  at  destination,  or  other  place  Avhere  the  Carrier  is 
authorized  to  make  delivery  or  end  its  responsibility.  Any  responsibility 
of  the  Carrier  in  respect  of  the  Goods  attaching  prior  to  such  loading  or 
continuing  after  leaving  the  Vessel 's  tackles  as  aforesaid,  whether  the 
Goods  are  in  course  of  lighterage  by  the  Carrier  or  however  else  the 
same  may  be  situated,  shall  be  the  same  only  as  that  of  a  warehouseman, 
without  liability  on  the  part  of  the  Carrier,  except  for  want  of  ordinary 
care;  and  all  conditions,  exemptions,  exceptions,  and  limitations  of  the 
liability  of  the  Carrier  contained  in  this  coiitra.ct  shall  be  deemed  to  apply 
also  to  such  warehouseman's  liability  as  well  as  to  liability  as  a  carrier. 
The  Carrier  may  place  the  Goods  in  store  while  awaiting  loading,  trans- 


DELIVERY    OF    EXPORT    ORDERS  611 

shipment,    forwarding   or   delivery   and   thereupon    be    discharged     of    all 
responsibility  for  loss  of  or  damage  to  the  Goods  while  so  stored. 

5.  Full  freight  through  to  destination  of  the  Goods,  whether  intended 
to  be  prepaid  or  collected  at  destination,  and  all  advance  charges  against 
the  Goods  are  due  and  payable  to  the  Pastor  Fruit  Company  upon  receipt 
of  the  Goods  by  the  latter;  and  the  same  and  any  further  sums  becoming 
payable  to  the  Carrier  hereunder  and  extra  compensation,  demurrage,  for- 
warding charges,  general  average  claims,  and  any  payments  made  and 
liability  incurred  by  the  Carrier  in  respect  of  the  Goods  (not  required 
hereunder  to  be  borne  by  the  Carrier)  shall  be  deemed  fully  earned  and 
due  and  payable  irrevocably  to  the  Carrier  at  any  stage,  before  or  after 
loadixig,  of  the  entire  service  hereunder,  without  deduction  (if  unpaid) 
or  refund  in  whole  or  in  part  (if  paid),  Goods  or  Vessel  lost  or  not  lost, 
or  if  the  voyage  be  broken  up,  or  in  any  circumstances  whatsoever,  and 
whether  the  voyage  is  begun  or  not;  and  shall  be  payable  in  United 
States  currency  or  its  equivalent ;  and  the  Carrier  shall  have  a  lien  on  the  ■ 
goods  therefor  (whether  payable  in  advance  or  not  and  though  noted 
hereon  as  prepaid)  surviving  delivery,  and  for  the  whole  thereof  on  any 
part  or  proceeds  of  the  Goods ;  and  the  shipper,  consignee  and/or  assigns 
shall  be  jointly  and  severally  liable  therefor,  and  notwithstanding  any 
lien  therefor  has  been  surrendered.  Full  freight  shall  be  payable  on  dam- 
aged and  unsound  Goods.  The  Carrier  may  collect  freight  on  bill  of  lading 
weight,  measurement  or  quantity,  and,  if  gross  weight,  measurement  or 
quantity  delivered  exceeds  weight,  measure  or  quantity  on  Avliich  freight 
may  be  computed,  the  Carrier  may  collect  freight  on  such  excess,  unless 
shown  to  have  been  caused  by  absorption  of  water  during  the  transit.  Any 
error  in  freight  or  other  charges  or  in  the  classification  herein  of  the 
Goods  is  subject  to  correction,  and  if  on  collection  the  freight  or  charges 
are  higher,  the  Carrier  may  collect  the  additional  amount.  Should  a  pack- 
age consist  of  several  parcels  for  more  than  one  person,  full  freight  shall 
be  paid  on  the  parcels  for  each  person  as  if  shipped  and  consigned  as  a 
separate  package.  If  there  be  an  enforced  interruption  or  abandonment 
of  the  voyage  at  a  port  of  distress  or  elsewhere  and  the  Goods  or  any 
part  be  forwarded,  the  cost  thereof,  including  extra  compensation  if  per- 
formed by  vessels  in  the  service  of  the  Carrier,  shall  be  paid  by  shipper, 
consignee  and/or  assigns. 

6.  The  shipper,  consignee  and/or  assigns,  shall  pay,  immediately  and 
before  delivery  or  forwarding,  all  entry  or  clearance  fees,  tolls,  duties, 
taxes,  imposts  and  fees  upon  account  of  the  Goods,  and,  unless  otherwise 
expressly  provided  herein,  all  discharge,  landing,  lighterage,  wharfage, 
storage,  dispatching,  reshipping  or  transshipping  charges  or  expenses  on 
account  of  the  Goods  or  which  the  Carrier  or  Vessel  may  pay,  incur,  advance 
or  become  responsible  for,  voluntarily  or  otherwise,  in  connection  there- 
with at  port  or  place  of  discharge,  delivery  or  entry  thereof ;  and  also 
any  fine  or  penalty  incurred  by,  or  loss  or  expense  occasioned  to  the 
Carrier  by  reason  of  illegal,  incorrect  or  insufficient  documents  or  marking 
or  numbering  of  packages,  or  goods,  or  description  of  contents  or  weight 
or  other  particulars  or  by  reason  of  any  other  act  or  omission  of  shipper, 
consignee  and/or  assigns;  the  Carrier  to  have  a  lien  on  the  Goods  therefor. 

7  In  case  of  a  single  article  or  package  exceeding  two  tons  in  weight, 
the  true  weight  thereof  sliall  be  declared  at  time  of  delivery  to  the  Car- 
rier. If  the  weight  of  any  package  is  incorrectly  given  or  no  weight  is 
declared  of  a  package  exceeding  two  tons,  and  in  consequence  of  reliance 
theron  any  loss  or  damage  arises,  either  to  the  article  or  package,  or  to 
the  Carrier  or  to  others,  or  if  uny  increased  charges  or  expenses  are  incurred 
by  the  Carrier  in  handling  or  caring  for  any  such  article  or  package,  the 
same  shall  be  borne  and  paid  solely  by  the  shipper,  consignee  and/or  assigns. 


612    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

8.  The  Vessel  shall  have  liberty  hereunder,  either  before  or  after  i^ro- 
ceeding  to  or  toward  any  port  of  discharge  or  transshipment,  to  proceed  to 
or  toward,  call,  enter,  or  stay  at  any  port  or  ports,  although  not  upon  the 
usual  or  any  route  to,  and  although  in  a  contrary  direction  to  or  beyond 
the  port  of  discharge  or  transshipment,  once  or  oftener,  backwards  or 
forwards,  in  any  order  or  rotation,  for  any  purposes  whatsoever,  though 
pertaining  to  another  voyage,  and  the  same  shall  not  be  deemed  a  devia- 
tion but  be  deemed  within  the  voyage  hereby  intended  as  fully  as  if  specifi- 
cally descrilHHl  herein ;  and  the  Vessel  shall  have  liberty  also  to  sail  in  or  out 
of  ports  and  to  proceed  with  or  without  pilots ;  to  proceed  under  sail 
or  in  tow;  to  tow  and  assist  vessels  in  any  situation  and  to  deviate  for 
the  purpose  of  saving  life  or  property;  and  in  case  of  salvage  services 
rendered  to  the  Goods  during  the  voyage  by  another  vessel  belonging  to 
or  in  the  service  of  the  same  carrier,  such  services  shall  be  paid  for  as 
fully  as  if  the  salving  vessel  belonged  to  or  was  in  the  service  of  strangers. 

9.  The  Carrier  shall  have  liberty,  in  its  discretion,  before  or  after 
shipment  or  loading,  to  substitute,  or  ship  the  whole  or  any  portion  of 
the  Goods  by  any  other  steamship  or  steamships,  although  prior  or  sub- 
sequent; and  shall  have  liberty  in  its  discretion,  at  any  port  or  place, 
to  transship,  land  and  transship  or  forward  the  Goods,  or  put  into  store, 
craft  or  other  available  place  and  thence  transship  or  forward  the  same 
to,  or  en  route  to  destination,  by  any  vessels,  crafts  or  other  conveyances, 
by  land  and/or  water,  subject,  if  transshipped  to  a  continuing  carrier, 
to  the  provisions  of  the  usual  form  of  bill  of  lading  of  such  carrier 
whether  issued  or  not,  and  on  deck  if  required  by  any  continuing  carrier 
or  the  character  of  any  vessel  or  craft  and  upon  delivery  of  the  Goods 
into  the  custody  of  a  continuing  carrier,  or  representative,  shall  there- 
upon be  relieved  of  all  further  responsibility  for  the  Goods,  and  the  clean 
receipt  of  the  continuing  carrier,  or  representative,  shall  be  in  evidence 
as  against  sliipper,  consignee  and/or  assigns  of  delivery  of  the  Goods  to 
the  continuing  carrier  in  good  order  and  condition.  In  case  of  transship- 
ment the  Carrier  may  delay  forwarding  awaiting  a  vessel  or  conveyance 
in  its  own  service  or  with  which  it  has  established  connections.  Cargo  for 
ports  or  places  in  Jamaica  other  than  Kingston,  may  be  transshipped  or 
otherwise  treated  in  accordance  with  the  privileges  of  this  or  other 
articles  at  Kingston  or  other  Jamaican  port,  at  shipper's  risk  but  ship's 
expense,  lighterage,  wharfage  and  other  landing  charges  at  destination 
to  be  paid  by  consignee.  If  the  Goods  are  delivered  to  any  transfer  agent, 
wharfinger,  warehouseman  or  others  or  from  one  to  the  other  for  the 
transfer,  handling,  custody,  delivery  and/or  other  disposition  thereof  or 
awaiting  same,  such  transfer  agent  and  others  shall  be  deemed  the  agents 
solely  of  shipper,  consignee  and/or  assigns,  and  all  responsibility  as  car- 
rier or  otherwise  of  the  Vessel,  Carrier  or  others  so  delivering  shall  there- 
upon be  ended  until  the  Goods  again  come  into  its  possession. 

10.  If  the  Vessel  is  prevented  by  Quarantine  from  entering  or  from 
making  due  disposition  or  delivery  of  the  Goods,  or  is  detained  at  Quar- 
antine, the  Goods  may  be  forthwith,  witliout  notice,  discharged  into  laza- 
rettos, craft  or  other  places  immediately  available,  at  the  risk  and  expense 
of  shipper,  consignee  and/or  assigns,  and  such  discharge  shall  be  a  com- 
plete delivery  of  the  Goods  hereunder  and  all  responsibility  of  the  Carrier 
therefor,  as  carrier  or  otherwise,  shall  end  without  notice  as  soon  as  the 
Goods  leave  the  vessel's  tackle  and  full  freight  through  to  the  destination  of 
the  Goods  be  payable.  The  Carrier  may  submit  the  Goods  or  the  Vessel  with 
or  without  the  Goods  on  board  to  fumigation  or  other  quarantine  treat- 
ment in  order  to  enter,  dock  or  secure  despatch  for  the  Vessel.  If,  by 
reason    of    Quarantine,    blockade,    Avar,    hostilities,    conditions    of    surf    or 


DELIVERY    OF    EXPORT    ORDERS  613 

weather,  shortage  of  lighters,  riots,  or  of  strikes,  lockouts,  stoppage  or 
shortage  of  kbor,  of  the  Carrier's  employees  or  others,  or  by  reason  of 
any  of  the  Excepted  Causes  mentioned  elsewhere  in  tliis  Bill  of  Ladine- 
lack  of  permit  to  land  the  Goods,  or  other  conditions  existing  or  threat- 
fr.  ^*  f  %f '*  «^  transshipment,  entry  or  discharge  of  the  Goods  or  else- 
where the  Vessel  is,  or  in  the  Master's  opinion  is  likely  to  be  prevented 
or  delayed  in  reaching  or  entering,  or  making  due  delivery  of  the  Goods 
at  the  port  of  transshipment,  entry  or  discharge,  or  delay  at  said 
port  or  in  discharging  tliere  beyond  the  usual  time,  then  either  with  or  wTth 
ou  proceeding  to  or  toward  or  entering  or  attempting  to  enter  said 
port,  the  Goods  may  be  retained  on  board  and  discharged  on  return  tr  p 
or  subsequent  voyage,  subject  to  this  Bill  of  Ladingf  and  all  Hbert  es 
hereunder  or  be  discharged  as  convenient  for  the  Vessel  at  aii^  other  por 
to  which  the  Vessel  is  bound  or  may  proceed,  or  be  returned  to  port  of 
shipment  and  there  discharged  and  redelivered' to  the  shi^pe  ,  at  rfsk  and 

Sr,W  h      ''^T\   ''T^'"''   ""'^/^^   ''''^Sns,   all    respoLsibilities   of 'he 
Carrier  being  ended  without  production  of  this  Bill  of  Lading  upon  such 
discharge  and   full   freight  through   to   destination   of  the   Goods  Cethe 
with    extra   compensation    for    additional    transportation    and    service!   and 
any   extra   expenses   being   payable   by   shipper,'  consignee   and/or   assies 
and  at  Carrier's  option  the  Goods  may  be  carried  or^ forwarded  to  desd^ 
nation  from  any  other  port  at  which  so   discharged   at  risk  and   expense 
ot     he  shipper,   consignee   and/or   assigns,   subject   in   any  case  hereunder 
s  perfSrmeTr  ^  ^^f/^P-ts  of  this  Bill  if  Lading  ^f  trrnsporSn 
IS  pertormed   by  the  Carrier,  or  to  the  usual  Bill  of  Lading  of  anv  other 
carrier  performing  the  same.     The  Carrier  may,  in  its  StLn    in  or  e 
to  secure  despatch  for  the  Vessel  at  port  of  discluirge    entry  or  transs  it 
ment  of  the  Goods,  proceed  thence  with  the  whole  or  any  portion  of  the 
goods  on  board  and  discharge  the  same  on  the  return  trfp^rsubseaueu 

Uuf  J  I  ^  f-  ^^""ler's  convenience  to  destination  at  Vessel's  expense 
other  reelects  ttV;'"""'  consignee,  and/or  assigns  in  either  case,  subjlc  hi 
otner  respects  to  the  provisions  of  this  Bill  of  Lading  in  case  of  tr-ni«,>r,r 

reS,X''ti.e'r;r'  °-  °^ '"- "™'" "" »'  ■^■^'■■/»*-  -roii^^ts?:; 

11.     The   Carrier   shall   not   be   liable,   as   carrier   or   otherwise    for   anv 

r"afterr'duS""/1^^-f '  ^^-"-^  «-'"""^^  ^^^^^  tranT'or  b^f^r'e"^ 
delivery  or  oth"^.  °'   ^l'^^^   awaiting   loading,    transsliipment,   discharge 

quen^e thereof  or  T.  "  ^'°"'  f  "^  '''''''  wheresoever  occurring  or  conse- 
barratrv    tCft  ^    k"'?  "''^  *"  extinguish  the  same;   by  jettison;   by 

barratry,  theft  or  embezzlement  of  master  or  crew;  by  act  of  God-  bv 
enemies,  pirates,  robbers  or  thieves;  by  arrest  or  restraint  of  Governments'^ 
princes,  rulers  or  peoples;    by  prolongation  of  the  voyage;    by  leJ^    pro 

Goods'or  oT'Zv"  T'^:^'  ^^^--^-tion  or  othi  t^atment^  of '"he 
Goods  or  of  the  Vessel  with  or  without  the  Goods  on  board  required  bv 
Quaran  ine,  sanitary  or  other  public  authorities,  or  in  order  lo  obtain 
despatch  for  the  Vessel  or  Goods  or  clean  bill  ^f  health;  by  pestile  I'e 
r  ot  ,  wars  rebellions;  by  strikes  or  stoppage  of  labor  troubles^  of  Car 
rier  s  employees  or  others;  by  explosion  or  bursting  of  boilers  damage 
from  steam,  breakage  of  shafts,  accidents  to  or  from  machinery  or  break- 


61i    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

age  or  derangement  thereof;  by  any  latent  or  other  defect  in  hull,  ma- 
chinery or  appurtenances  of  the  Vessel  or  any  graft  or  unseaworthiness 
thereof,  although  existing  at  time  of  shipment  or  transshipment  or  at  the 
beginning  of  the  voyage,  provided  due  diligence  shall  have  been  exercised 
to  make  the  same  seaworthy ;  by  collision,  grounding  or  stranding ;  by 
heating,  heat  of  holds,  or  effects  of  climate  or  temperature ;  by  ice,  earth- 
quake, sea  water,  wetting,  rain,  or  spray,  damp,  frost,  decay,  putrefaction, 
ferment,  rust,  stains,  sweat,  floods  or  freshets  by  giving  away,  falling 
or  destruction  of  wharf,  shed  or  warehouses ;  by  damage  incident  to  trans- 
portation ;  by  change  of  character,  loss  of  weight  or  contents,  drainage, 
leakage,  breakage,  shrinkage,  evaporation  or  wastage;  by  cooperage  or 
mending;  by  vermin,  or  rat  damage;  by  stowage  or  contact  with,  or  smell, 
evaporation,  leakage,  escape  of  contents  or  taint  from  other  goods,  the 
Vessel  being  privileged  to  carry  any  other  articles,  whether  hazardous  or 
contraband  or  not,  and  live  stock,  as  cargo  or  otherwise,  on  and/or  under 
deck;  by  nature  of  the  Goods  or  cargo,  or  insufficiency  of  packages  though 
known  before  shipment;  by  explosion  or  combustion  of  any  cargo,  whether 
shipped  with  or  without  disclosure  of  its  nature  or  condition;  by  oblitera- 
tion, error,  insufficiency  or  absence  of  marks,  numbers,  address  or  descrip- 
tion;  by  land  damage,  risk  of  craft,  hulk  or  transshipment;  by  faults 
or  errors  in  navigation  or  management  of  the  Vessel,  provided  due  dili- 
gence shall  have  been  exercised  to  make  the  Vessel  in  all  respects  sea- 
worthy and  properly  manned,  equipped  and  supplied ;  by  any  act  or  omis- 
sion of  shipper  or  owner  of  the  Goods,  or  of  his  agent  or  representative. 
Flour,  meal,  corn,  rice  and  other  foodstuffs  in  sacks,  being  subject  to 
minor  loss  of  contents  notwithstanding  due  care,  it  is  mutually  agreed  that 
to  the  extent  of  one-twentieth  of  the  original  weight  loss  of  contents  of 
any  such  package  shall  be  deemed  without  Carrier 's  fault,  and  the  Carrier 
shall  not  be  responsible  therefor. 

12.  The  shipper  shall  be  liable  for  and  bear  any  loss  or  damage  to 
the  Carrier  or  to  others  caused  by  inflammable,  explosive,  noxious,  hazar- 
dous or  dangerous  goods  or  articles  shipped  without  full  disclosure  of  their 
nature  at  the  time  of  lading  and  entering  hereon,  whether  shipper  be 
principal  or  agent,  or  aware  of  the  njiture  of  the  goods  or  articles  or  not; 
and  such  goods  or  other  articles  may  be  thrown  overboard  or  destroyed 
at  any  time  by  the  Carrier  without  compensation  to  any  person;  and  extra 
charges  and  expenses,  if  any,  for  discharging,  lightering,  handling  or 
caring  for,  or  otherwise  ■  occasioned  by  such  goods  or  articles,  or  those 
declared  or  considered  noxious  or  hazardous  by  the  civil  or  military  author- 
ities of  any  port,  shall  be  borne  by  the  shipper,  consignee  and/or  assigns. 
Goods  or  articles  of  such  character  may  be  carried  on  deck,  as  well  as 
any  ethers  whose  nature  or  bulk  requires  them  to  be  so  carried,  and  the 
same  shall  be  at  the  risk  of  the  owner  thereof  of  all  loss  or  damage  thereto 
occurring  while  so  situated  not  shown  due  to  the  Carrier 's  fault. 

13.  General  Average  shall  be  payable  according  to  York-Antwerp  Rules 
of  1890,  and  as  to  matters  not  herein  provided  for  according  to  the  law 
and  usage  at  the  port  of  New  York.  If  the  ship  owner  shall  have  exer- 
cised due  diligence  to  make  the  vessel  in  all  respects  seaworthy  and  to 
have  her  properly  manned,  equipped  and  sujjplied,  it  is  hereby  agreed 
that  in  case  of  danger,  damage  or  disaster  resulting  from  fault  or  error 
in  navigation  or  in  the  management  of  the  Vessel  or  from  any  latent  or 
other  defect  in  the  Vessel,  her  machinery  and  appurtenances,  or  from 
unseaworthiness,  although  existing  at  time  of  shipment,  or  at  the  beginning 
of  the  voyage  (provided  the  defect  or  unseaworthiness  was  not  discoverable 
by  the  exercise  of  due  diligence),  the  shippers,  consignees  and/or  owners 
of  the  cargo   shall  nevertheless  pay  salvage  and  any  special  charges   in- 


DELIVERY    OF    EXPORT    ORDERS  615 

curred  in  respect  of  the  cargo  and  shall  contribute  with  the  ship  owners 
in  general  average  to  the  payment  of  any  sacrifices,  losses  or  expenses  of 
a  general  average  nature  that  may  be  made  or  incurred  for  the  common 
benefit  or  to  relieve  the  adventure  from  any  common  peril. 

14.  This  shipment  is  subject  to  all  the  terms  and  provisions  of  the 
Act  of  Congress  of  the  United  States,  approved  February  13th,  1893, 
entitled  "An  Act  relating  to  the  navigation  of  vessels,"  etc.,  and  of  Sec- 
tions 4282  to  4287,  each  inclusive,  of  the  United  States  Eevised  Statutes. 
The  Carrier  shall  not  be  liable  for  gold  or  other  precious  metals,  precious 
stones,  bills,  notes  or  securities,  documents,  pictures,  glass,  china,  silk, 
furs,  lace  or  any  of  the  articles  enumerated  in  Section  4281  of  the  United 
States  Eevised  Statutes,  except  in  accordance  with  such  statute,  and  after 
written  notice  of  the  character  and  value  thereof  at  the  time  of  loading 
and  entry  thereof. 

15.  The  Carrier  shall  not  be  responsible  for  specie,  bullion,  jewelry,  plate, 
precious  stones  or  metals,  bank  notes,  bonds  or  other  negotiable  documents 
or  valuables  until  actually  delivered  on  board  the  Vessel  to  the  master  or 
other  officer  in  charge  of  the  deck  at  the  time  and  signed  for  by  him. 
Delivery  must  be  taken  on  the  Vessel's  deck  at  port  of  discharge,  and  the 
Carrier's  responsibility  shall  thereupon  cease.  Such  articles  are  received 
and  the  rate  of  freight  has  been  specially  adjusted  upon  the  condition 
and  understanding  that  the  value  thereof  has  been  insured  by  the  shipper 
or  others  for  account  of  the  Carrier  in  respect  to  its  liability,  under  usual 
form  of  Lloyds  Policy  or  equivalent,  and  that  the  shipper  by  accepting 
this  bill  of  lading  represents  that  such  insurance  has  been  effected,  and 
undertakes  that  the  Policy  shall  be  available  for  the  Carrier 's  protection 
in  case  of  need. 

16.  The  Carrier  does  not  undertake  that  the  Vessel  is  equipped  with  re- 
frigerated or  specially  cooled  or  ventilated  compartments  or  otherwise  equip- 
ped for  transportation  of  goods  or  articles  of  a  perishable  nature,  nor 
whether  so  equipped  or  not,  to  transport  such  or  any  other  goods  or  articles 
in  any  such  compartment  or  otherwise  than  as  ordinary  cargo,  and  shall  not 
be  liable  for  any  loss  or  damage  from  failure  so  to  do,  unless  such  transpor- 
tation is  expressly  stipulated  for  herein.  Fresh  fruits,  vegetables  and  meats 
and  any  goods  or  articles  of  a  perishable  nature,  however  carried  are  re- 
ceived and  carried  at  the  sole  risk  of  the  owner  thereof.  The  Carrier  shall 
not  be  responsible  for  any  loss  or  damage  to  such  goods  or  articles  from 
temperature  or  atmospheric  conditions,  risks  of  refrigeration,  cooling,  or 
ventilation,  accident  to,  or  latent  or  other  defect  in,  or  explosion,  breakage, 
derangement,  insufficiency,  shortage  or  failure  in  any  respect  or  unsea- 
worthiness of,  or  in  respect  of  any  refrigerator  or  refrigerated  or  specially 
cooled  or  ventilated  compartment  or  plant,  or  apparatus,  boiler,  engine, 
machinery,  appliances,  materials  or  supplies  therefor,  or  any  part  thereof, 
although  existing  at  time  of  shipment  or  transshipment,  or  at  the  begin- 
ning of  the  voyage,  provided,  in  case  of  loss  or  damage  from  any  such 
unseaworthiness,  due  diligence  shall  have  been  exercised  to  make  the  Ves- 
sel seaworthy;  and  if  any  such  goods  or  articles  shall  at  any  stage  be, 
or  in  the  opinion  of  the  Master  or  Carrier 's  representative  be  decayed, 
injurious  or  offensive,  or  be  condemned  or  ordered  destroyed  by  the  Health 
or  other  authorities,  the  same  may  be  thrown  overboard  or  destroyed, 
without  notice,  before  or  after  arrival,  and  the  Carrier  shall  not  be  respon- 
sible therefor.  The  Carrier  may  discharge  any  such  goods  or  articles  or 
other  cargo,  without  notice,  immediately  the  Vessel  is  ready,  notwith- 
standing danger  to  such  goods  or  articles  from  freezing  or  other  weather 
conditions,  and  all  such  goods  or  articles  are  received  subject  to  the  risk 
of  such  discharge,  and  if  delivery  thereof  is  not  taken,  without  notice,  from 


616     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

the  Vessel 's  tackles,  or,  at  Vessel 's  option,  from  the  wharf  as  soon  as 
available  after  landing,  the  same  may  be  left  on  wharf  or  other  con- 
venient place  or  may  be  held  on  board  and/or  placed  in  warehouse  at  risk 
of  shipper,  consignee  and/or  assigns,  and  if  held  on  board  for  sucli 
reason  or  because  of  weather  conditions  the  Shipper,  Consignee  and/or 
assigns  shall  pay  for  any  detention  of  the  ship  therefor,  the  amount 
to  constitute  a  lien  on  the  goods.  The  provisions  of  this  Article  are  in 
addition  to  and  not  in  substitution  for  the  other  provisions  of  this  Bill 
of  Lading,  and  all  goods  of  such  nature  as  mentioned  herein  or  to  be  carried 
in  refrigerated  or  specially  cooled  or  ventilated  compartment  are  received 
and  are  subject  also  to  all  other  terms,  conditions,  exceptions  and  limita- 
tions as  to  liability  contained  in  this  Bill  of  Lading. 

17.  The  Vessel  may  commence  discharging  upon  arrival  immediately 
she  is  ready,  without  notice,  at  any  hour  of  day  or  night,  and  dis- 
charge with  or  without  intermission,  at  wharf,  in  stream  or  elsewhere,  at 
Carrier 's  convenience,  any  custom  of  the  port  to  the  contrary,  notwith- 
standing, (except  that  in  United  States  ports  delivery  need  be  taken 
only  during  the  usual  working  hours),  and  the  Collector  of  the  Port  is 
hereby  authorized  to  grant  an  Order  for  the  discharge  of  the  cargo  imme- 
diately after  Entry  of  the  Vessel.  Whether  the  Vessel  be  discharged  at 
wharf  or  in  stream  or  elsewhere,  the  Goods  may,  without  notice,  be  in  Avhole 
or  part  discharged  over  side  into  lighters  or  other  craft  or  be  otherwise 
discharged  at  risk  and  expense  of  shipper,  consignee  and/or  assigns  from 
the  time  the  Goods  leave  the  Vessel 's  tackles,  the  Carrier  being  hereby 
authorized  as  agent  for  the  shipper,  consignee,  and/or  assigns,  to  employ 
or  appoint  lightermen,  contractors  and/or  others  therefor,  without  respon- 
sibility of  the  Carrier  for  the  character  or  condition  of  any  craft,  for 
account  of  shipper,  consignee  and/or  assigns,  notwithstanding  the  latter 
are  at  hand  with  their  own  craft,  or  ready  to  take  delivery  otherwise. 
Delivery  of  the  Goods  shall  be  received  without  notice  from  the  Vessel 's 
tackles,  package  by  package,  as  the  Goods  come  to  hand  in  unloading,  or 
as  soon  as  available  if  discharged  on  Carrier's  wharf,  all  charges  and 
expenses  in  connection  with  the  Goods  from  the  time  the  same  leave  the 
Vessel 's  tackles  to  be  borne  by  shipper,  consignee  and/or  assigns  and 
constitute  a  lien  on  the  Goods.  If  not  so  received,  the  master  or  agent  of 
the  Vessel  is  hereby  authorized  at  the  risk  and  expense  and  for  account 
of  the  shipper,  consignee  and/or  assigns,  without  notice,  to  enter  the 
Goods,  and  after  discharging  the  same  as  above  provided  may  deposit 
them  in  hulk  or  craft  or  in  or  upon  wharf,  warehouse,  Public  Stores  or 
Custom  House,  or  permit  them  to  lie  where  discharged  or  landed,  or  make 
such  disposition  thereof  as  the  authorities  of  the  port  may  direct,  subject 
at  all  times  to  any  lien  of  the  Carrier,  including  storage  charges  by  the 
Carrier,  and  to  that  end  to  employ  such  lightermen,  truckmen,  warehouse- 
men, wharfingers  or  other  agencies  as  may  be  requisite,  customary  or 
proper,  who  shall  be  deemed  the  agents  solely  of  shipper,  consignee  and/or 
assigns  and  not  of  the  Carrier,  the  latter  being  hereby  relieved  of  all 
responsibility  for  or  in  respect  of  the  Goods,  without  notice  to  any  person 
whatsoever,  as  soon  as  the  same  leave  the  Vessel's  tackles  (but  nothing 
herein  contained  shall  be  deemed  to  limit  the  right  of  the  Carrier  as  above 
provided,  to  appoint  lightermen  and  others  notwithstanding  consignee  or 
others  are  at  hand)  ;  or  the  Goods  may  be  retained  on  board  and  disposed 
of  as  provided  in  case  of  quarantine  or  other  detention  existing  or  threat- 
ened at  port  of  discharge  and  subject  to  the  same  terms  as  to  risk,  expense 
and  otherwise.  If  the  shipper,  consignees  or  assigns  entitled  to  the  Goods 
shall  not  within  48  hours  after  unloading,  without  notice,  pay  the  freight 
and  all  other  sums  payable  to  the  Carrier  by  shipper,  consignee  and/or 
assigns  and  relieve  the  Carrier  from  all  further  responsibility  and  expense 


DELIVERY   OF   EXPORT  ORDERS 


617 


for  storage  charges  or  otherwise  iu  respect  to  the  Goods  the  Carrier  i, 
hereby  authorized  at  any  time  on  48  hours'  notice  by  n  ail  to  cons^Jnee 
or  assigns  or  other  person  named  for  notice  in  the  bill  of  1  idin-  of  •? 
such  consignee  or  assigns  or  other  person  is  unknown  or  cannot  be' found 
n  port,  then    without  notice,  to  sell  the  Goods  and  retaiSand  pay  from 

of  the'S    /  "'^r^''  '"""^'^'^^  ^"^  ^"  «"-«  ^^'  the  Carrier  in^espec 
of  the  Goods  from  shipper,  consignee  and/or  assigns  and  all  other  charts 

he  first  of  said  ports  at  which  the  Vessel  may  Slltir  Goods' ^7.  he' 
landed  at  said  port  of  entry  as  the  port  of  discharge  therefo?  ^  ^" 

inee  or  for  the  performance  of  nn/l.tv,  GojcrMient  agent  or  nom- 

or  other  anthorities  or  deUver^Ti,  ?^H  "'?'?'  "'"""'  ^^  *'«  <■"'«»"" 
others,  any  resZi.  buiv  of  Sf  p  .  T'^'^'  °'  """I"  ""thorities  or 

the  consigLe  fn  horWe,  Ivl  rfiSerf  ■■  """'  ^'  "!'"'"'  "■"'"""  "»"«  »» 
as  the  Goods  are  r/Sfl  or  ,,?'' ,™'"T'°"'""'''  <"■  »"■"».  "s  »"<>" 
thereupon  in^  S"  L"  e'"Sd"  of  ,!",',;» r We'  ^  Str  T  1  ''"^'^ 

brd^eeLrtfe  :,:sf,:u"lf'\ir''°"" "" '^^^^^ 

the  Goods;  „nt  t&  e-rst.feo'jLrXetltr.iroTtS'S^ie^ 
paotageI,'"'.S'"s.S"be^teif1h::e:!;^S  IZaT.'^l?  '°^  "-''  »' 

:ctay/tr.ha^^t"swLVr-:JBr-'""'^^^ 

consignees  of  like  goods  rceord.n.tiH.^.'T"'""''''  '"  "'"  '""'«"'"* 
good  delivery;  and  if  any  c™s tl  i  t'^fg^  a-1  be  accepted  as 

called  for  b'rtin/nndaSdISr  f ''Se\trb„"t%'' dTe''  T  '•"'i""' 
numbers,  shall,  at  Carrier's  ontinn    L  111       ,^^  ^"*  of  different  marks  or 

G^ods  and  be  'accepted  b^  1:^^^:^^^-^^^  LFit^t;! - 

nol\Jefmo^lrlZ  ;:Xg:  norls'oT'^'  ''V-'^'T  ^'  '''  ^-«^«  ^^«- 
thereon  has  been  adjusted  on  ^.chitf-P''  '"^'  ^^°*'  ^'^^^  "^e  freight 
agreement  shall  b  e'^Sdence  of  a  differTnt";;i^  ""  T'  ^-^'•^^''^t-'^  or 
liability  of  the  Carrier  in  respect  of  theM  l  '    .^^  ^^'"P^ting  any 

thereon  higher  than  the  invoW  Hi  r-  T\^-'  "'^  ""^^"^  "'^'■^^^  be  placed 
under)  not%xceed£rg  $foO ToTi.  p^  ka^gr'ntl  o'o"'"''  Vpaia'^.ere. 
such  other  value  as  may  be  stited   wS  ,  •^,    P^""  """^^'^   ^"^^    (or 

liable  for  any  damag^s^for  dehv  px^/.i^'  T  '''''"  "'^  ^^"i'^^  be  held 
not  exceeding^said  vSL  nor  for^i^v  nl'fi^^  *'''°*^  P"  ^^^*-  «^  '^^^  ''ost 
over  such  cost  not  IxceedW  said^a^e  no'/ f"'"'"'"  °^  P"^^  °^  ^^'^' 
quential  damage  and  the  Carfie^  hall  alw.vTb  .^""^  'P'"^^  °^  '^«°««- 
any  lost  or  damaged  Goods  ^'  ^^'''  *^'  «P*^«^  ^^  replacing 

of 'the  ZXt^  S^f^Serrrrtate'^^'^'^d"^^'  ^^^'^^  — ^ 
ex.ts  or  may  exist  the  Carrier^^  Vestrlgrn^^t^L^l^^bfe^^oVi^^y^^^^^^^^ 


618    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

loss,  shortage  or  damage,  unless  notice  of  claim  therefor  be  presented  in 
■writing  to  the  Carrier  or  to  the  master  or  agent  of  the  Vessel  before 
removal  of  the  Goods.  If  there  is  no  opportunity  to  discover  before 
removal,  that  such  loss,  shortage  or  damage  exists  or  may  exist,  then  the 
Carrier  or  Vessel  shall  not  be  liable  therefor  unless  such  notice  of  claim 
be  so  presented  within  48  hours  after  removal  of  tlie  Goods.  The  Carrier 
or  Vessel  shall  not,  in  any  event,  be  liable  for  any  claim  or  demand  arising 
under  this  Bill  of  Lading  or  in  respect  of  the  Goods,  unless  notice  of  the 
claim  be  presented  in  writing  to  the  Carrier  within  thirty  days  after 
delivery  of  the  Goods  to  tlie  initial  Carrier  hereunder,  nor  unless  suit 
therefor  is  commenced  within  sLx  months  after  delivery  of  the  Goods  to 
the  initial  Carrier  hereunder,  and  the  lapse  of  such  period  shall  be  deemed 
a  complete  bar  to  recovery  in  any  such  suit  or  proceeding  not  sooner  com- 
menced, notwithstanding  the  Carrier  may  be  a  non-resident  or  a  foreign 
corporation.  Nothing  shall  be  deemed  a  waiver  of  the  provisions  of  this 
article  except  a  written  express  waiver  signed  by  the  Carrier. 

23.  In  case  of  any  loss  or  damage  for  which  the  Carrier  shall  be  liable, 
the  Carrier  shall  to  the  extent  of  such  liability  have  the  full  benefit  of 
any  insurance  that  may  have  been  effected  upon  the  Goods  or  against  said 
loss  or  damage,  and  as  well  also  of  any  payment  to  insured  by  underwriters 
repayable  only  out  of  recovery  against  the  Carrier,  notwithstanding  the 
underwriters  were  not  obligated  to  make  such  payment. 

24.  Whether  so  stated  or  not,  if  this  Bill  of  Lading  is  issued  against 
lighter,  warehouse  or  shipping  receipt  or  another  Bill  of  Lading  or  any 
similar  document,  the  issuer  of  such  document  shall  be  deemed  a  prior 
Carrier  or  custodian  of  the  Goods,  subject  to  the  provisions  of  such  docu- 
ment, and  the  Carrier  issuing  this  contract  shall  not  be  responsible  for  the 
Goods  until  actually  delivered  into  its  custody.  If  the  Vessel,  for  Carrier 's 
convenience  or  otherwise,  loads  in  whole  or  part  in  stream  or  elsewhere 
than  alongside  where  the  Goods  are  received  for  shipment,  the  Goods  may 
be  transferred  to  the  Vessel  at  risk  and  expense  of  shipper,  consignee 
and/or  assigns  until  loaded  on  the  Vessel,  the  Carrier  being  authorized  to 
employ  or  apj^oint  transfer  agents  and/or  others  therefor  to  be  deemed 
the  agents  solely  of  shipper,  consignee  and/or  assigns.  The  Goods  may  be 
transported  at  any  stage  by  lighter  or  craft,  either  in  course  of  loading, 
transshipment  or  delivery,  or  en  route  to  destination  or  otherwise.  All 
such  transportation,  whether  at  Carrier's  expense  or  not,  shall  be  at  risk 
of  siiipper,  consignee  and/or  assigns,  subject  in  other  respects  to  the  pro- 
visions of  this  Bill  of  Lading,  and  if  entrusted  by  the  Carrier  to  others 
shall  be  deemed  to  be  by  connecting  carriers  subject  to  their  usual  con- 
tract without  responsibility  of  the  Carrier  in  respect  thereof. 

25.  Unless  special  care  in  consideration  of  increased  freight  has  been 
arranged  for  and  is  provided  for  herein,  all  cargo  is  subject  to  stowage  in 
holds  and  handling  in  quantities  along  with  other  cargo  in  any  customary 
manner  required  for  usual  despatch,  and  to  such  stowage  as  available 
when  the  cargo  is  received  or  as  the  nature  of  the  other  cargo  permits, 
and  to  contact  with  other  cargo,  working  and  pressure  and  the  like,  and 
the  rate  of  freight  is  adjusted  with  reference  to  such  handling  and  stowage 
only.  All  cargo  liable  to  loss  or  injury  by  breakage,  contact  with  other 
cargo  or  in  any  other  manner  under  such  conditions,  should  be  so  wrapped, 
cased  or  packed  as  adequately  to  protect  the  same  therefrom;  and  the 
Carrier  shall  not  be  answerable  for  any  loss  or  injury  to  foodstuffs  or 
other  loose  materials  in  single  bags,  liquids  in  glass  or  tins,  glass,  un- 
wrapped bales  of  skins  or  of  other  cargo,  unprotected  cargo  of  any  sort 
or  to  any  cargo  when  such  loss  or  injury  would  not  have  been  received  if 
the  cargo  had  been  so  protected,  and  shipper,  consignee  and/or  assigns  of 
any  cargo  not  so  protected  shall  be  answerable  for  and  bear  any  loss  or 
damage  to  the  Carrier  or  others  arising  therefrom.  Live  birds  or  animals 
and  livestock  are  received  at  sole  risk  of  shipper,  consignee  and/or  assigns 


DELIVERY  OF  EXPORT  ORDERS 


619 


the  Vessel  not  having  any  special  equipment  therefor,  and  are  subject  in 
other  respects  to  the  provisions  of  this  Bill  of  Lading,  and  to  be  deemed 
included  in  the  term   "Goods." 

26.  In  addition  to  the  other  terms  and  provisions  of  this  Bill  of  Lading 
which  sliall  be  deemed  affected  only  in  so  far  as  inconsistent,  the  bill  of 
lading  shall  be  subject  to  any  special  clauses  written,  printed,  pasted  or 
stamped  on  front  or  back  thereof. 

27.  This  Bill  of  Lading,  duly  endorsed,  shall  if  required,  be  given  up 
to  the  Garner  in  exchange  for  a  delivery  order. 

28.  This  Bill  of  Lading  shall  be  construed  and  the  rights  of  the  parties 
thereunder  determined  according  to  the  law  of  the  Gommonwealth  of 
Massachusetts  subject  to  any  laws  of  the  United  States  inconsistent  there- 
with. 


».     The  Shipper,  Veuel.  Conilcnee.  Deitlnallon.  «n<)  Qoodi  refemd  to  ontpaie  u  aianlloned  or  dokritod 

Shipptr  .,         Ri>g»l  ShMCBramy 

Ve«,l . SBg_P»ilS si.i,Si„„\. .i^f"^  •°-'*^' Ootob«r  15.  IK\ 


tide  (tMKk)  heceof  a 


Dr<;tination  of  theG<KMls 

Consignee  Order  of- 

Notify  (If  Coosigrned  to  Shipper's  Order). 

Routin',' rif  any)        ^    


Armnui.  k  D.i;Ut, 


DESCRIPTION  OF  COOOS 

M.»., 

Number* 

Ouamitiei 

Cl^ASS  kXX>  COMTIKTB  OF  PACKAGES 

SHIPPEk'B 

SH„™', 

Rats 

St>.m.„, 

lo-ordar  of- 

"•Ol  Sho«  Coop 

"y. 





--  — 

"BotUy 



— 

Ara«H'  *  C»Kltt 



-Hamwr 

lA- 

— a 

-C«W, 

--C«1IH    Hid    to  OCBUU  «k0M.      _ 

s»/S 

US  lbs. 

^J&_ 

U 

«  — 









— 

. 

-  — 





... 



24a  ka. 

— 









. 

. 









-~ 



. 

..        _ 

0_T_  N   E  0  ! 

T-l.J'JU. 

E) 



i 

3«  fflUmae  ffllirrrot  th.  C»rr.o  l^.o.T  Co»l-»,,,  by  it.  wnl  bu  .Igned  a.,d  l..„e 

.-  -        oriplnjl  tltlta  of  Lading  excluaive  erf  ooplea,  »l)  of  the  kane  tcoor  asd  date   ann  n 

U.lof  «««npl.,h..d  tbo  «tho™  to  ,UBd  «id.                            •.  a  1  o   tne  Mne  Uoor  to*  d«(..  «m  of 

Dated  at  BOSTON, 

Vb,"' 

Total  Steanufup  freight. 
■.1dt>anf<e  Chargea. 
Connilar  Fees. 

-      -4 

11- 

00 
St 

No. 

^/P 

-Propii 
Totat  I 

rutltm  *f,BA 

PREPAID  »>«.. 

UNITED    TKVurtttiJ/<Ky. 

»<■  uu  jkar^ — 

b/     —6y^- 

- 

5.  Cvrrtmcy. 

620    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Tlie   bottom    of  the  form  reads: 

It  is  mutually  agreed  that,  in  addition  to  the  other  terms  and  conditions 
of  the  Bill  of  Lading,  which  shall  be  deemed  affected  only  in  so  far  as  in- 
consistent herewith  this  shipment  is  at  the  sole  risk  of  the  owners  thereof, 
of  all  risks  of  war,  arrest,  restraint,  capture,  seizure,  destruction,  detention, 
sinking,  interference  or  hostilities  on  the  part  of  any  Power  and  of  all 
consequences  thereof;  and  the  Vessel  shall  have  liberty  in  the  discretion 
of  the  master,  owner  or  any  agent  or  charterer  thereof  to  proceed  notwith- 
standing any  such  risks  and  armed  or  unarmed,  and  with  or  without 
,'onvoy,  also,  if  deemed  advisable  in  the  judgment  of  such  master,  owner 
or  agent  or  charterer,  in  order  to  avoid  loss,  damage,  delay,  expense,  or 
other  disadvantage  or  danger  to  vessel,  cargo,  passengers  or  other  interest, 
or  danger  thereof  existing  or  threatened  or  believed  so  to  be,  to  wait  at 
the  port  of  shipment  or  elsewhere,  and/or,  either  with  or  without  pro- 
ceeding to  or  toward  the  port  of  discharge  or  entering  or  attempting  to 
enter  or  discharge  the  Goods  there  and  whether  such  proceeding,  entry  or 
discharge  be  permitted  or  not,  to  proceed  to  or  toward  any  other  port  or 
ports  in  or  not  in  any  route  to  destination  and/or  return  to  the  port  of 
shipment,  once  or  oftener,  backwards  or  forwards,  in  or  not  in  any  order 
or  rotation,  retaining  the  goods  on  board  or  discharging  the  same  at  risk 
and  expense  of  the  owners  thereof  at  port  of  shipment  or  elsewhere  at  the 
first  or  any  subsequent  call,  being  thereupon  relieved  of  all  responsibility 
in  respect  thereof,  and  full  bill  of  lading  freight,  extra  compensation  for 
any  additional  service  and  any  extra  expense  occasioned  thereby  shall  be 
paid  by  shipper,  consignee  and/or  assigns  and  shall  constitute  a  lien  on 
the  Goods;  and  the  Vessel  is  privileged  to  carry  any  cargo,  not  excepting 
contraband;  and  the  vessel  shall  have  liberty  in  any  circumstances  to 
comply  with  any  orders  or  requests  of  the  Government  of  the  United  States 
or  of  Great  Britain,  its  allies  or  any  insurance  or  other  department  or 
bureau  or  agency  thereof  or  any  convoying  vessel  or  any  Underwriters  or 
of  any  person  purporting  to  act  with  the  authority  of  any  such  Govern- 
ment or  department,  bureau  or  agency  or  Underwriters,  or  of  any  con- 
voying vessel. 

If  the  Goods  or  documents  do  not  satisfy  all  the  requirements  for  im- 
portation of  the  authorities  at  destination  or  port  of  entry  or  discharge, 
or  the  shipment  does  not  satisfy  the  requirements  of  the  Consular  or  other 
representative  having  jurisdiction  thereof  of  the  United  States  or  Great 
Britain  or  any  of  its  allies,  or  discharge  or  delivery  is  objected  to  by  any 
such  Consular  or  other  representative,  or  authority  tlierefor  from  such 
Consular  representative  of  the  United  States  is  not  obtained  before  the 
Goods  are  ready  for  entry  or  discharge,  the  Goods  may  be  forthwith,  with- 
out notice  delivered  into  the  custody  of  any  such  authorities  or  Consular 
representative  or  landed  or  stored  for  account  of  whom  it  may  concern  or 
otherwise  disposed  of  as  any  such  authorities  or  Consular  representative 
may  direct  or  recommend  or  may  be  disposed  of  as  provided  for  in  case  of 
quarantine  or  other  detention  existing  or  threatened  at  port  of  discharge 
and  subject  to  the  same  terms  and  shippers,  consignees  and/or  assigns  shall 
pay  for  all  delay  of  the  steamer  occasioned  thereby  or  in  order  to  comply 
with  any  bunkering  or  other  agreement  with  the  United  States. 

30.  AND  FINALLY  that  in  accepting  this  Bill  of  Lading  the  shipper, 
owner  and  consignee  of  the  Goods  and  holder  of  this  Bill  of  Lading  agree 
to  be  bound  by  all  its  provisions,  on  tliis  jiage  and  ovcrpage,  whether  writ- 
ten, printed,  pasted  or  stamped,  as  fully  as  if  signed  by  all  of  them. 


FORM  3L    Bill  of  Lading 


DELIVERY   OF   EXPORT  ORDERS  621 

The  bill  of  lading  is  delivered  to  the  Export  Shoe  Com- 
pany in  exchange  for  the  dock  receipt.  The  number  of 
copies  of  the  bill  of  lading  required  will  vary  according 
to  the  practice  of  the  company  and  the  market  to  which 
the  goods  are  to  be  sent.  For  the  Gonzales  &  Castillo 
order  four  copies  have  been  prepared,  the  negotiable 
copies  being  used  later  for  financing.  Since  the  bill  of 
lading  contains  the  title  to  the  goods,  it  constitutes  a 
very  important  instrument  in  the  handling  of  export 
orders.  The  non-negotiable  copies  are  used  for  records. 
In  the  Gonzales  &  Castillo  order  the  bill  of  lading  is 
made  out  in  the  name  of  the  shipper,  while  the  consignee 
is  to  be  notified  that  the  shipment  has  arrived.  The  title 
to  the  goods  will  be  passed  to  Gonzales  &  Castillo  only 
when  the  draft  is  accepted  upon  presentation  by  the 
bank;  upon  acceptance,  the  documents  are  surrendered. 

The  commercial  invoice,  which  is  made  out  in  Spanish, 
has  several  characteristics  which  deserve  mention  be- 
cause they  afford  a  contrast  to  the  usual  characteristics  of 
a  domestic  invoice :  (1)  the  arrangement  whereby  the  con- 
tents of  each  case  are  billed  separately;  (2)  the  state- 
ment of  gross  and  net  weight  in  both  pounds  and  kilo- 
grams, together  with  the  cubic  contents  (such  statements 
of  weights  and  measures  are  needed  in  order  to  comply 
with  customs  requirements  and  also  for  the  purpose  of 
computing  ocean  freight  charges  which  are  sometimes 
based  upon  weight,  but  in  practice  usually  upon  cubic 
measurement) ;  (3)  the  signature  of  the  invoice  and  the 
declaration  of  origin,  which  when  translated  reads  as 
follows : 

"I  declare  that  I  am  the  manufacturer  of  the  goods 
mentioned  in  the  present  invoice,  that  the  prices  and  other 
conditions  contained  in  it  are  correct,  and  that  goods 
covered  by  said  invoice  are  products  of  the  industry  of 
the  United  States  of  America." 

In  shipment  to  Australia,  for  example,  a  separate  form 
is  required  for  the  declaration  of  origin.  Many  exporters 
also  prefer  to  use  separate  statements  of  weights  and 
measures. 


622    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


EXPORT  SHOE  COMPANY 


BOSTON,  MASS. 


GONZALES   &    CASTILLO 
HAVANA 

CUBA 


OCT  15  19a 

60  DAYS 

SIGHT  tRATT  DOC.  ATT. 


DESCRIPTION 


CAJAS    # 

1 


CALZADO   HOIIBRES 


TRIO   BRODEQUm   KANG 

25232-3-4 

PALL  MALL  BRODE(iUIH  BECERRO 

2525  5-6 


60  PARE  6  00 


■^ 


PESO  BRUTO  220  LIBRA  NET  160  LIBRA 
BRUTO  KILOS  99.550  NET  KILOS  72.40 
17  PIES  CUBICAS  1252  POLLEGADAS  CUBICAS 


2                PALL  liALL  BRODE^UIN   BECERRO 

2  526  5-6 

33      " 

6 

50 

214 

50 

ESSEX  ZAPATO  BAJO   PATENT 

25267-8 

39      " 

5 

00 

234 

00 

PESO   BRUTO   225  LIBRA  NET   165  LIBRA 

BRUTO  KILOS    101.82  NET  KILOS   74.66 

17   PIES    CUBICAS    1252  POLLEGADAS    CUBICAS 

3                ESSEX    ZAPATO   BAJO   PATENT 

25267-8 

6      ■ 

6 

00 

35 

00 

CREST   BRODE^UIN   AJilARILLO 

25269-70-71 

65      " 

7 

00 

462 

00 

72 

PESO  BRUTO  230  LIBRA  NET  170  LIBRA 
BRUTO  KILOS  104.07  NET  KILOS  76.92 
17   PIES   CUBICAS   1252  POLLEGADAS   CUBICAS 


INDICE  #  7744    ORDER  #  20 
MAR  CAS 
TO   ORDER  OP 
EXPORT   SHOE  CO 
NOTIFY 
GONZALES   &    CASTILLO 
HAVANA 
CUBA 


216   PARE 


1384    50 


DECLARO  QUE  SOY  EL  FABRICANTE  DE  LAS 
MERCANCIAS  RELACIONADAS  EN  LA  PRESENTE  FAC- 
TURA  Y  QUE  SON  CIERTOS  LOS  PRECIOS  Y  DEMAS 
PARTICULARES  QUE  EN  ELVA  SE  CONSIGNAN.  Y  QUE 
LAS  MERCACIAS  CONTENIDAS  EN  DICHA  FACTURA 
SON  PRODUCTOS  DE  LA  INDUSTRIA  DE  LOS 

ESTADOS  UNIDOS  DE  AMERICA 

EXPORT   SHOE    COMPANY 

By    Jje-^^ja^LSju^^X^/itr-n — . 
ASST.    TiftAivrT 


VOID    (FOR  EXHIBIT  OHLT) 


TB 


IPLIC^ 


ft: 


FORM  32.    Commercial  Invoice 


DELIVERY  OF  EXPORT  ORDERS 


628 


For  this  order  ten  copies  of  the  invoice  are  made,  but 
the  practice  varies  according  to  the  system  of  the  con- 
cern, the  customs  requirements,  and  the  desires  of  the 
purchaser. 

The  insurance  of  the  shipment  against  loss  is  provided 
for  by  the  Export  Shoe  Company  under  general  policy, 


nm^fi 


45-3 


MARINE    DEPARTMENT 


o.  c.    208 


CERTIFICATE  OF  INSURANCE 


The  Newfound  if S'k%S;X^? 


October  14, 


.19  21. 


This  Certifies,  That 


EXPORT   SHOE  COMPANY 


Js  insured  under 


and  subject  to  the  conditions  of  Open  Policy  No.. 


20100 


of  The  Newfound  Insurance  Co.mpanv, 


in  the  sum  of. 


Seventeen   hundred  !§    and   thirty  ------- 


JDolIars  in  Gold 


Three  caeee.  Nob.  ». 'S   1-3 


Sum  Insured 


(Copy  not  Negotiable.) 


S.  S.  San  Pablo 


At  and  from_.. 


Boston,  Uaes.  i,]  .S  v 


5l5_»  '^°   Havana,  Cuba, 


o.  "j -o  Export  Shoe  ConMjany 

plac*  of  tbe  policy  arWcnOrera   all   rights   of   the   orlgloal   policy-holder   (for   the   parpot*  of 
•w^   0  a  ipecUl   poUcj   direct  to  tbe  holder  of  thlB  CertlOeat*.  cod  fr«« 

tfia  nrtlfl'^ato  shall  be  reported,  ss  eood  as  tbe  goods  aro  landed  or  tt* 


.   policy   and    contraei    of   tn- 
anut  t»*  sUmped  wlttxla  {in> 


Losa,  it  any   payable  to 

upon  surrender  of  this  Certificate. 


-or  oraer. 


liability    for 
b  as«it  at  nu 

claim).   RB  fully   an  If  tba   property 
eh' port,  notice  aball  b»  tmmedlotely 

ler  shDll  be  aubmltted  for  approval  t 

'^ltV''re.'e'lpl"l 

eted  occordlng  to  tbe  OBage  of  tbe  p 
h  the  Revenue   I.au  8  of  Great  Brltali 

Not    valid   unless    countersigned   by  DAVSaiPORT  *   CO. 
Countersigned    ?4Y™?9?T.*=  .?9t . 


[1\Mm^ 


FORM  33.     Certificate  of  Insurance 


624    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

which  allows  the  company  to  insure  a  number  of  ship- 
ments without  going  through  the  formality  of  making 
separate  arrangements  for  each  one.  For  each  ship- 
ment is  filled  out  a  policy  similar  to  the  form  below, 


NOTICE 


Tn  event  <^f  lops  or  damage,  report  some  Immediately.  Arrange  for  u  purvey  with  tlie  Corapaoy'a  Claim  Agent  at  the  port  of 
dLscharge  or  disaster.  If  there  be  none  at  or  near  aoch  port,  notice  stiali  De  given  to  an  accredited  representative  nf  the  National 
Hoard  of  Slarlue  Inderwriters  of  New  York  or  the  lioard  of  L  nderwriters  of  New  York;  or  If  theie  be  none,  to  the  accredited 
represe"iitatlve  of  Lloyda,  London. 

Ite<)uest  such  representative  to  hold  a  purvey  and  Issue  a  certlflcate  stating  the  cause  and  extent  of  the  loss  or  damage  as  well 
as  the  market  value  of  the  uierchandlse  Involved  had  It  arrived  In  .sound  condition.  When  poods  are  discharged  from  a  vessel  in 
a  damaged  cundltiou,  file  a  claim  in  writing  against  the  vessel  owners  hefore  removing  goods  from  dock. 

After  the  foregoing  formuliliee  have  iteen  comiiiied  n-itb  a  st-Ttemeot  of  tlie  claim  with  the  complete  documents,  Includiuf 
■  the 

SETTLING  AGENTS  CLAIM   AGENTS 

UNITED  KINGDOM. 

{  IX>NI)ON— nogg.    LLDdler    *   Co. 
nOGO.   LIJIDLET  i  CO.,  SCANDINAVIA. 

Palmeraton  Houae,  Old  Broad  St,  london,  E.  C.  I  n,'i"LrH'4i'JEN^.i."D"'l"co"""'"" 


SECBETAItT  OF  THE  COMITE  DES  ASRUBKURS 

MARIT1ME3  DE  PABIS  S  Bne  da  4  Septemhrev  Paris.'!     *''*'";„,.|;,  oNA-nilo  d.  o    1    HueU«. 

I.  I  CIUIIAITAII— Sultb    tUMMtl    *   00, 

ITALY  AND  MEDITERRANEAN  PORTS. 
EVAN  MACKENZID  falazio  della  Merldlana.  Genoa,  j  ?oi'?*s»f["'-L."8i'™"i  oo, 

RUSSIA. 

SKCRETABT    ROSSIA   INSDRANCB  CO.  Pcuogtad  j  '""iUiu'i'iJIir,^™'    ""tssa.    rETnooiP,    niTiU    n.U)lV08T0C«- 

BRAZIL. 
THOMAS  P    STEVENSON.  Companhla  Eipreeso  Federal.  j ''l^'itvnA."  rTifiN^'S°"\**i!AiivDA  Vo'^^nobti!*''perna^ 

.Q    D  jt        i,«       .. T>i       J       T         .  1      JANIilHO.    BIO    GRAMiE    nO    NOBTB,    BIO   GBANni    PO   6UL   aAWTOS— 

4S  BuB  da  Alfandega,  Bio  de  Janeiro.  [       (\>iiip>ut)iB  Euprt^Mo  podeni. 
ARGENTINE. 
SANTAMARINA  e  HIJ09,  Victoria  804.  Buenos  Aires,  j  nUENOs  AinE!i_a.oi.m.rlii.  .  Bljoc 

WEST  COAST  OF  SOUTH  AMERICA. 
RAE  BANNA,  Oalle  Cochrane,  687,  Valparaiso.     GUAVAQUi'i..'EruAoo«-"odMS°Tr.aiiig  Co. 

1  I.IMA.    1  EBU-AllH-rto    Dclboj.    I*.    O.    B«i    11«. 

CUBA. 

AQUILINO  OBDONEZ  7a  Cuba  St,  Havana  (  havana-a^uiiIoo  ortDiu«. 

JAPAN. 
r.  8.  MORSB  16  Maye  M/ichU  Kobe.  ~ 

CHINA. 

ANBERSEN,  UETEB  k  CO..  L/rp,,  of  China,  jciiANosnA  rankow.  harbin.  BONosoNa.  tLAlOAH.  pbki.n.  tibntvui— 

4-5  Yuen  Ulng  Yuen  Road,  Shanghai.  )     ^^'""^  """  *  *•  ''"■•  •'  ""^ 
INDIA. 

DAT— RUIIck.    Nlien  *  Ot>. 


GLADSTONE,  VeYLLIB  «  CO. 


,    Sl>«Ur»    A 


PHILIPPINES,  STRAITS  SETTLEMENTS.  EAST  INDIES. 

AX'IA— Blnrtcn  A  Ox 

>AN— 8Iurt«ra   A    Cn- 
ARANO— aiujtrra  A  0». 


AUSTRALASIA. 

R.  W    C.VUERON  «  00.  Sydney.  N.  8.  W.  {  "'k""^!''^.^',"^''"*^.'''  ''™™'  ''""'"■   *»»^J«»"»- 

AFRICA. 

[ZANZIDAR,     UOMIIA.SA — Smllb.     Ut^kroxl*    A     Oo, 

Adjusted  ai>d  approved  claima  under  thit  Certificate  are  payable  through  the  following  Banki : 

BRANCllUS  OP  lll(,\NriIK.S  OF 
THE  NtTIONtl  CITV  BANK  OF  SEW  YORK  «T  -                            THE  INTERNATIONAL  BANKING  CORPORATION  OF  NEW  TORK  AT - 

Bnenoa  Aires.  Argentine                Havana,  Culm                                        Itonibay  Mi'^IelUa 

Rio  de  Janeiro,  Braidi                   Santiago  de  Cuba.  Coba                    Calcutta  rnnnma 

Santos,    Itrazll                                      Bahla.    Itrazll                                            Cnntoa  Peking 

Montevideo,  irraguay                      Valparaiso.  Chile                                  ("el'U  Pnerta   Plata 

.Kao  Paulo,  BraiU                            Genoa.   Italy                                           Colon  San  I'edro  de  Uacorla 

Petroprad,    Russia                                                  llaukoif  Santo   I>omlngo 

IloMK  Konc  Slianghal 

BR.\N(ni  OF                                                     Kot.e  .'^Ingaiwre 

THE  FARMERS  LOAN  !•  TRUST  CO.,  AT  PARIS,  FRANCE                    KmiLm  Tlenl.'iln 

Manila  Yokohama 


FORM  34.     Reverse  of  Certificate  of  Insurance 


DELIVERY  OF   EXPORT  ORDERS 


625 


which  becomes  effective  upon  the  signature  of  the  agents 
of  the  insurance  company.  It  will  be  noticed  that  this 
certificate  contains  provisions  for  insurance  against  theft, 
robbery,  and  pilferage,  a  form  of  insurance  which  has 
been  very  necessary  in  the  course  of  the  past  few  years. 

It  will  be  noticed  that  the  invoice  does  not  contain  the 
bill  of  charges  for  insurance,  ocean  freight,  consul  fees, 
preparation  of  the  bills  of  lading,  handling,  wharfage  or 
lighterage  at  Havana.  Many  firms  place  upon  the  invoice 
the  statement  of  charges,  but  the  Export  Shoe  Company 
jjrefers  to  send  a  separate  bill  of  charges  for  freight, 
insurance  and  other  items. 

The  documents  are  now  all  complete  and  ready  for  pre- 
sentation to  the  bank,  together  with  the  draft  which  is 
made  out  for  the  sum  of  the  invoice  total  and  the  bill 
of  charges. 


FORM  35.     Draft 


626     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  credit  manager  sends  this  draft,  with  copies  of 
the  consular  invoice,  commercial  invoice,  bill  of  charges, 
and  insurance  certificate,  to  the  bank  either  for  collec- 
tion or  for  discount.  If  for  discount,  the  Export  Com- 
pany will  receive  its  payment  for  the  shipment  as  soon 
as  the  draft  has  been  accepted,  assuming  that  the  credit 
of  the  Gonzales  &  Castillo  Company  is  satisfactory. 

Form  37  on  page  627  may  be  used  to  notify  the  bank. 

On  the  same  day  a  letter  as  shown  in  Form  36,  below, 
advising  the  customer  of  shipment  is  mailed  to  him,  to- 
gether with  a  copy  of  the  invoice. 


EXPORT  SHOE  COMPANY 

EXPORT  DEPARTMENT 

BOSTON.  U.  S.  A. 


October  17,  1921. 


Ueesrs.  Gonzales  Sc   Castillo, 
Havana,  Cuba. 


Gentlemen: 


We  are  pleased  to  inform  you  that  shipment 
of  your  order  #20  went  forward  on  the  15th  of  October  via  the 
S.  8.  Pablo  of  the  Pastor  S.  S.  Co.   This  shipment  comprises 
three  cases,  as  per  the  enclosed  copy  of  our  invoice. 

We  are  drawing  on  you  in  the  usual  manner. 

We  trust  that  the  shoes  will  be  received 
promptly  and  we  feel  confident  that  they  will  open  up  to  your 
entire  satisfaction. 

Very  truly  yours, 

EXPORT  SHOE  COMPANY 


FORM  36.  Notification  Letter  to  Customer 


DELIVERY  OF   EXPORT   ORDERS 


627 


THE  BOSTON  BANK 

Foreign  Departmeil 

Boston,  Mass. 


B/Exchange 

Our  No 

For 

Usance 

On 

D  S 

i 

Present  upon 
Deliver  document' 


(receipt  of  draft 
(arrival  of  vessel 


(acceptance  of  draft 
(paiTue.ii  iJ  dflaft 


Protest  for  ("""acceptance 

(non-payment 

If  extension  is  requested,  gram _days.  collecting  interest  ; 

If  paid  before  maturity  allow  discount  of 


If  drawee  remits  direct,  deliver  documents  free 
In  case  of  need  refer  to 


Allow  inspection  of  goods  or  sampling  orders 

In  case  of  refusal  have  advice  sent  by  mail  (or  by  cable  for  amounts  of  S250.00  and  over) 

Have  advice  of  payment  cabled  at  

(my  expense 


Remarks 


of  repudiation  instruct  correspondent  to  make  entry,  place  in  warehouse,  and  insure  goods,  pending  in 
1 


DRAWEES  STREET  ADDRESS  ON  THE  DRAFT  WILL  GREATLY 
FACILITATE  COLLECTIONS 


All  drafts  on  foreign  countries  must  be  signed  and  endorsed  in  pen  and  ink 


FORM  37.     Form  for  Notifying  Bank 


628     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

When  collection  has  been  made,  the  transaction  is 
complete. 

Upon  documentation  in  export  trade,  see  especiaUy  Paper  WoTk  in  Export 
Trade,  Bureau  of  Foreign  &  Domestic  Commerce,  Miscellaneous  Series  No. 
85,  prepared  jointly  by  Warren  Maule  and  Guy  E.  Snider;  this  contains 
two  sections,  one  of  which  is  devoted  to  the  descrijjtion  of  four  typical 
transactions  and  the  other  containing  a  considerable  number  of  practice 
forms  and  descriptions  of  export  teclinique  relating  to  delivery.  The  His- 
tory of  an  Export  Order,  published  by  the  National  Association  of  Manu- 
facturers, continues  to  be  a  very  satisfactory  exposition.  Cf.  also  Eosenthal, 
Technical  Procedure  in  Exporting  and  Importing,  'Part  I.  European  prac- 
tice is  illustrated  in  Dudeney,  The  Exporter's  Handbook  and  CAossary, 
Chaps.  XXXI,  XXXIV,  XXXVII;  and  Sounedorfer-Ottel,  Die  Technik  des 
WeWiandcIs,  Vol.  I,  Section  V, 


DELIVERY   OF   EXPORT   ORDERS 


G29 


Addenda  2  (see  page  586)  : 

*The  following-  is  a  typical  form  of  insurance  certifi- 
cate issued  under  an  open  or  floating  policy  : 


CERTIFICATE    OF    INSURANCE 


(S4^_^ 


THE 


ci£. 


Marine  Insurance  Company 


OF  THE  CITY    ^--^       ZT^ 


OF  NEW  YORK 


ThU  certifiet,  That._ ^_ 

and  subject  to  the  conditions  of  Open  Policy  Xo 
in  the  smn  of 


Valued  at 

On  board 

At  and  froa 


*-3 

"""»• -^ — 


8  2 


' — 15  insured   under 

-of  The  Marine  Insubance  Company 

■  - - -  ^ —Dollars 


1x163,  if  any,  payable  to 

upon  surrender  of  this  Certificate. 


Thla  C^rtlflcBte  [ 


" —   PJ    -"i  — 

- -StH— 

— rg| 

«  the  plore  of  (hp  pa,.y  'nnaJroS',,  „„  , 
r>ert„  B,^« r^O^y  ^     ^^'  ' 


h#  purposf  nf  rotlertlng 


....  *  ^  Wled   tlDgdom.  '"  twiieci  a  ciajm  under 


MARKS  AND  NUMBERS 


SPECIAL  CONDITIONS 


UkUiK  part  Id   le 
restraint,   dcteon 


flier  lawfu 


!";?•„ 


FORM  38.    Face  of  Insurance  Certificate 


J 


630     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


FORM  39.     Reverse  of  Insurance  Certificate 

The  insurance  policy,  as  distinguished  from  the  insur- 
ance certificate,  differs  as  iUustrated  by  the  following 
forms : 


OPEN     POLICY 

..., ON   ACCOUNT  OF 


upon  all  fclads  of  lawful  goodH  and  mercbandlM,  lad«n  or  to  b*  ladei 


Whereof  !■  mantcr  tor  llitn  prcm-nt  voyage.  or  wlioi-vcr  rise  fliinll  go  for  nmatei'  lo  tbt  "aid 

vestirl,    or   b;    whatever   otlier    name   or    nnmrii    thp    said    vcnnel    or   the  master   tlier(>of,   Is   or  abaU   be   niuncd   or   rnllcd, 

ItKCINNINt;    tbe   adveoture   upoo   tbe  aald   gooda  and    nxTrbandlno.  from  nod  Imnutllatrly  foIlowliiR  the  loading  IhrrMf  on   hoaro 
of    the    R3U]    vessel    at  as    aforeaald,    and    no    ahnll    continue    and    endure    until    lh<-    snld    Bo«da    and    merchandlBe, 

fihall   be  nafely  landed  at  Bfl  nforcsnld.     AND  It  pitinll  and   nviy   he  lowtiil   fur  the  nnid   v.-bbi-I  In 

b»r  rnyogf  to  pr^r'ed  nnd  sail  to.  touch  and  itay  at.  any  porta  or  plfUfs,  tf  tliercwnto  obllcrd   by  otn  tn  of  wcnther,  i.r  nttuT  unnvni.lnlile 

^       y^t>.....l         —ttt.Jp.>     ^r^^fjAl^p.     »-       f\.^'     'Tlirtnf"  '*'''"     '"'■*      -»..fl^     ..r..!      n,,.,/.l..»^tL.^        h,.Fi^m     l..uiifiul        np^uaillu.1      JM^fnUi...     ltmlml^.<l       at 


upon  all  kinds  of  lawful  goods  and 

merchandise,  laden  or  to  be  laden  on  board  the  good 

Whereof    is   master   for    this   present 

voyage,  or  whoever  else  shall  go  for  master 


DELIVERY   OF   EXPORT   ORDERS  631 

in  the  said  vessel,  or  by  whatever  other  name  or  names  the  said  vessel  or 
the  master  thereof,  is  or  shall  be  named  or  called. 

BEGINNING  the  adventure  upon  the  said  goods  and  merchandise,  from 
and  immediately  following  the  loading  thereof  on  board  of  the  said  vessel 
at  as  aforesaid,  and  so  shall  continue  and  endure 

until  the  said  goods  and  merchandise,  shall  be  safely  landed  at 

as  aforesaid.  AND  it  shall  and  may  be  lawful  for  the  said 
vessel  in  her  voj-age  to  proceed  and  sail  to,  touch  and  stay  at,  any  ports 
or  places,  if  thereunto  obliged  by  stress  of  weather,  or  other  unavoidable 
accident,  without  prejudice  to  this  insurance.  The  said  goods  and  mer- 
chandise, hereby  insured,  are  valued   (premium  included)   at 

TOUCHING  the  adventures  and  perils  which  the  said  insurance  com- 
pany is  contented  to  bear,  and  take  upon  itself  in  this  voyage,  they  are  of 
the  Sea,  fires,  pirates,  rovers  assailing  thieves,  jettisons,  criminal  barratry 
of  the  master  and  mariners,  and  all  other  like  perils,  losses  and  misfortunes, 
that  have  or  shall  come  to  the  hurt,  detriment  or  damage  of  the  said  goods 
and  merchandise  or  any  part  tliereof.  And  in  case  of  any  loss  or  mis- 
fortune, it  shall  be  lawful  and  necessary  to  and  for  the  assured,  his  or 
their  factors,  servants  and  assigns,  to  sue,  labor  and  travel  for,  in  and 
about  the  defence,  safeguard  and  recovery  of  the  said  goods  and  merchan- 
dise, or  any  part  thereof,  without  prejudice  to  this  insurance,  nor  shall  the 
acts  of  the  insured  or  insurers,  in  recovering,  saving  and  preserving  the 
property  insured,  in  case  of  disaster,  be  considered  a  waiver  or  an  ac- 
ceptance of  an  abandonment ;  to  the  charges  whereof,  the  said  Insurance 
Company  will  contribute  according  to  the  rate  and  quantity  of  the  sum 
herein  insured.  The  consideration  for  this  insurance  is  fixed  at  a  rate  as 
endorsed. 

Premiums  payable  monthly  in  casli. 

This  Company  is  to  be  entitled  to  premium  at  their  usual  rates  on  all 
shipments  reported  or  not.  It  is  warranted  by  the  assured  to  report  every 
shipment  on  the  day  of  receiving  advice  thereof,  or  as  soon  thereafter  as 
may  be  practicable,  when  the  rate  of  premium  shall  be  fixed  by  the  Company. 

AND  in  case  of  loss,  such  loss  to  be  paid  in  thirty  days  after  proof  of 
loss,  and  proof  of  interest  in  the  said 

(the  amount  of  premium,  if  unpaid,  being  first  deducted),  but  no  partial 
loss  or  particular  average  shall  in  any  case  be  paid,  unless  amounting  to 
five  per  cent.,  PROVIDED  ALWAYS,  and  it  is  hereby  further  agreed, 
that  if  said  assured  shall  have  made  any  other  assurance  upon  the  premises 
aforesaid,  prior  in  day  of  date  to  this  policy,  then  the  said  Insurance 
Company  shall  be  answerable  only  for  so  much  as  the  amount  of  such  prior 
assurance  may  be  deficient  towards  fully  covering  the  premises  hereby  as- 
sured ;  providing  notice  of  deficiency  of  such  prior  assurance  be  given  to 
this  Company  before  arrival  of  vessel ;  and  the  said  Insurance  Company 
shall  return  the  premium  upon  so  much  of  the  sum  by  them  assured,  as 
they  shall  be  by  such  prior  assurance  exonerated  from.  AND  in  case  of 
any  insurance  upon  the  said  premises  subsequent  in  date  to  this  policy, 
the  said  Insurance  Company  shall  nevertheless  be  answerable  for  the  full 
extent  of  the  sum  by  them  subscribed  hereto,  wifhout  right  to  claim  con- 
tribution from  such  subsequent  assurers,  and  shall  accordingly  be  entitled 
to  retain  the  premium  by  them  received  in  the  same  manner  as  if  no  such 
subsequent  assurance  had  been  made.  Other  insurance  upon  the  premises 
aforesaid,  of  date  tho  same  day  as  this  policy,  shall  be  deemed  simultaneous 
herewith ;  and  the  said  Insurance  Company  shall  not  be  liable  for  more 
than  a  ratable  contribution  in  the  proportion  of  the  sum  by  them  insured 
to  the  aggregate  of  such  simultaneous  insurance. 

Warranted  not  to  abandon  in  case  of  capture,  seizure  or  detention,  until 
after   the    condemnation    of    the    property   insured;    nor    until    ninety    days 


632     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

after  notice  of  said  condemnation  is  given  to  this  Company.  Also  war- 
ranted not  to  abandon  in  case  of  blockade,  and  free  from  any  expense  in 
consequence  of  capture,  seizure,  detention  or  blockade,  but  in  the  event 
of  blockade,  to  be  at  liberty  to  proceed  to  an  open  port  and  there  end 
the  voyage.  IT  IS  ALSO  AGREED  that  the  property  be  warranted  by 
the  assured  free  from  any  charge,  damage  or  loss  which  may  arise  in  con- 
sequence of  a  seizure  or  detention  for  or  on  account  of  any  illicit  or  pro- 
hibited trade,  or  any  trade  in  articles  contraband  of  war  or  the  violation 
of  any  port  regulation. 

IT  IS  AGREED  that  upon  the  payment  of  any  loss  or  damage  the  In- 
surers are  to  be  subrogated  to  all  the  rights  of  the  Assured  under  their 
Bills  of  Lading  or  transportation  receipt  to  the  extent  of  such  payments. 

This  insurance  warranted  to  be  in  all  cases  null  and  void  to  the  extent 
of  any  insurance  by  any  carrier  or  bailee  which  would  attach  and  cover 
said  property  if  this  policy  had  not  been  issued,  and  to  be  null  and  void 
as  concerns  loss  or  damage  by  fire  on  land  to  the  extent  of  any  insurance 
against  loss  or  damage  by  fire,  directly  or  indirectly  covering  upon  the 
same  property,  whether  prior  or  subsequent  hereto  in  date,  and  it  is  also 
understood  and  agreed,  that  in  case  any  agreement  be  made  or  accepted  by 
the  assured  with  any  carrier  or  bailee  by  which  it  is  stipulated  that  such 
or  any  carrier  or  bailee  shall  have,  in  case  of  any  loss  for  which  he  may 
be  liable,  the  benefit  of  this  insurance,  or  exemption  in  any  manner  from 
responsibility  grounded  on  the  fact  of  this  insurance,  then  and  in  that 
event  the  insurers  shall  be  discharged  of  any  liability  for  such  loss  here- 
under, but  this  policy  in  these  and  all  cases  of  loss  or  damage  by  jjerils 
insured  against  shall  be  liable  and  owe  actual  payment  for  (only)  what 
cannot  be  collected  from  carrier  and/or  bailees  and/or  insurers  of  property 
lost  or  damaged,  but  also  shall  be  chargeable  with  the  direct  pecuniary 
consequence  to  the  assured  temporarily  arising  from  delay  in  collection 
from  said  carrier  and/or  bailees  and/or  insurers,  and  the  advancing  for 
this  purpose  only  of  funds  to  the  assured  for  his  protection  pending  such 
delay  shall  in  no  case  be  considered  as  affecting  the  question  of  the  final 
liability  of  this  insurance,  and  as  soon  as  collection  is  made  from  the  car- 
rier and/or  bailees  and/or  insurers,  the  title  of  the  assured  to  hold  the 
sums  so  advanced  by  the  insurer  shall  discontinue,  and  a  portion  thereof 
equal  to  the  sum  collected  from  the  carrier  and/or  bailees  and/or  insurers, 
shall  be  repaid  to  the  insurer,  but  in  case  of  final  failure  to  collect  from 
the  carrier  and/or  bailees  and/or  insurers,  a  portion  of  the  sums  advanced 
by  the  insurers,  equal  to  the  sum  short  collected  from  the  carrier  and/or 
bailees  and/or  insurers,  may  be  retained  and  applied  in  settlement  of  the 
actual  liability  of  this  insurance  thereby  established  (provided  always  the 
loss  shall  constitute  in  other  respects  a  claim  under  this  insurance).  In  the 
event  of  loss  or  damage  this  policy  shall  be  null  and  void  to  the  extent  of 
any  payment  made  by  any  carrier  or  bailees  or  insurers  whether  liable 
or  not. 

MEMORANDUM.  It  is  also  agreed,  that  printed  books,  cassia  in  mats, 
carriages,  charts  and  maps,  dyewoods  and  dyestuffs,  engravings,  and  ])rints, 
dried  fish,  green  fruit,  fire  crackers,  guano,  hay,  hempen  yarn,  hops,  ce- 
ment, iron  ore  and  metals  (of  all  kinds),  coal,  ginger  and  linseed  in 
pockets,  mahogany  and  any  other  woods,  musical  instruments,  paintings 
and  statuary,  personal  effects,  rattans,  salts,  seeds,  tin  plates,  vegetables 
and  roots,  wicker  Avare  and  willow  (manufactured  or  otherwise),  wire  of 
all  kinds,  clothing  (ready  made),  and  all  articles  that  are  perishable  in 
their  own  nature,  are  warranted  by  the  assured  free  from  average  unless 
general;  bacon  (in  boxes  or  bales),  bleaching  powder,  cassia  (exce]it  in 
mats),  cotton  bagging  (in  series  of  50  bales),  drugs  and  chemicals,  dry 
fruit,   floor  cloths,   floor  oil  cloths,   grain    (on  European  passages,   and   on 


DELIVERY   OF   EXPORT   ORDERS  633 

the  Mississippi  River  and  its  tributaries,  and  from  San  Francisco),  hessians, 
burlaps,  and  (similar  articles)  hemps,  carpetings,  household  furniture 
(new),  looking  glass  plates,  mats  and  matting,  moss,  oil  cake,  paper 
hangings,  paddy,  rags,  soda  ash,  sumac,  tampico  grass,  leaf  tobacco,  in 
boxes  or  bales  (in  series  of  50  bales),  and  tobacco  stems  are  warranted 
by  the  assured  free  from  average  under  twenty  per  cent,  unless  general; 
bread,  flax  and  sugar  (in  series  of  100  bbls.,  50  boxes,  20  hhds.,  100  bags 
East  India,  or  200  bags  South  American)  are  warranted  by  the  assured 
free  from  average  under  seven  per  cent,  unless  general;  and  cheese,  coffee 
and  cocoa  (in  series  of  100  bags),  grain  (coastwise),  gunnies  (in  series  of 
50  bales),  Indian  meal  (in  series  of  10  hhds.  or  100  bbls.),  jute,  hemp, 
hides  (ill  series  of  1,000),  linseed,  madder,  pepper,  pimento,  quercitron 
bark,  rice  (in  series  of  50  bags),  skins,  straw  goods,  saltpetre,  leaf  tobacco 
in  hhds.  (in  series  of  10  hhds.),  and  manufactured  tobacco,  are  warranted 
by  the  assured  free  from  average  under  ten  per  cent,  unless  general ; 
agricultural  implements,  bricks,  coal,  cutlery,  liar  J  ware,  lumber,  machinery, 
marble,  railroad  iron,  slate,  steel  rails,  stone  and  wooden  ware  are  war- 
ranted by  the  assured  free  of  claim  for  damage  or  for  any  breakage,  but 
liable  for  absolute  total  loss  of  a  part  (entire  packages)  if  amounting  to 
five  per  cent. 

Warranted  by  the  assured  free  from  damage  or  injury  from  dampness, 
change  of  flavor  or  being  spotted,  discolored,  musty  or  mouldy,  except 
caused  by  actual  contact  of  sea  water  with  the  articles  damaged,  occasioned 
by  sea  perils.  In  case  of  partial  loss  by  sea  damage  to  dry  goods,  cutlery 
or  other  hardware,  and  on  shipments  from  ports  and  places  east  of  the 
Cape  of  Good  Hope,  on  gunny  cloth,  gunny  bags  or  hides,  the  loss  shall  be 
ascertained  by  a  separation  and  sale  of  the  portion  only  of  the  contents 
of  the  packages  so  damaged,  and  not  otherwise;  and  the  same  practice 
shall  obtain  as  to  all  other  merchandise,  as  far  as  practicable.  Not  liable 
for  leakage  on  molasses  or  other  liquids,  nor  for  breakage  of  glass,  crockery, 
or  other  bottled  wares,  unless  occasioned  by  stranding  or  collision  with 
another  vessel.  And  it  is  also  agreed  that  in  case  of  loss  or  damage  to 
any  part  of  a  machine  consisting  when  complete  for  sale  or  use  of  several 
parts,  the  insurers  shall  only  be  liable  for  the  insured  value  of  the  part 
lost  or  damaged. 

In  ease  of  damage  from  perils  insured  against,  affecting  labels,  capsules 
or  wrappers,  loss  to  be  limited  to  an  amount  sufficient  to  jjay  the  cost  of 
new  labels,  capsules  or  Avrappers,  and  cost  of  reconditioning  the  goods, 
provided  same  amounts  to  a  claim  under  the  terms  of  this  policy. 

If  the  voyage  aforesaid  shall  have  been  begun  and  shall  have  terminated 
before  the  date  of  this  Policy,  then  there  shall  be  no  return  of  premium 
on  account  of  such  termination  of  the  voyage. 

Warranted  by  the  assured  or  expense  arising  from  cap- 
ture, seizure,  restraint,  detention  or  destruction,  or  the  consequences  of 
any  attempt  thereat,  whether  lawful  or  unlawful,  and  whether  by  the  act 
of  any  belligerent  nations  or  by  governments  of  seceding  or  revolting 
States,  or  by  unauthorized  or  lawless  persons  therein,  or  otherwise,  and 
whether  occurring  in  a  port  of  distress  or  otherwise,  anything  in  this  policy 
to  the  contrary  notwithstanding. 

This  insurance  is  not  to  cover  more  than  $ by  any 

one  sail  vessel,  nor  more  than  $ by  any  one  steam  vessel, 

or  in  any  one  place  at  one  time,  unless  otherwise  agreed  upon  at  the  time 
of  endorsement. 

This  policy  to  be  deemed  continuous  and  to  cover  as  above  unless  dis- 
continued by  either  party  on  giving  the  other days '  notice  in  writ- 
ing, which  cancellation,  however,  is  not  to  affect  any  risk  then  pending. 

Further,  the  insurer  may  effect  immediate  cancellation  by  giving  written 
notice  thereof   any  time   when   any  premiums  have  been   due   and   unpaid 


631     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

for  a  period  of  30  days;  but  such  cancellntion  shall  not  affect  risks  which 
have  attached  prior  to  notice  of  cancellation. 

This  j)olicy  is  also  to  cover  such  risks  as  may  be  approved  by  the  Com- 
pany and  endorsed  on  pass  book  or  policy. 

Proofs  of  loss  and  all  bills  of  expenses  must  be  approved  by  the  Agent 
of  the  Company,  if  there  be  one  at  or  near  the  place  where  the  loss  occurs, 
or  the  expenses  are  incurred,  or  if  there  be  none  in  the  vicinity,  by  the 
Correspondent  of  the  National  Board  of  Marine  TJnderwriters ;  and  such 
agent  or  correspondent  must  be  represented  on  all  surveys. 

Warranted  by  the  assured  if  loaded  with  Grain,  Petroleum  and  heavy 
cargoes  to  be  loaded  under  the  inspection  of  the  surveyor,  appointed  or 
approved  by  this  Company  for  that  purpose,  and  his  certificate  as  to  the 
proper  loading  and   seaworthiness  obtained. 

All  risks  insured  as  under  deck  unless  otherwise  specified  in  this  policy. 
Only  such  cargoes  as  shall  be  stowed  under  the  main  deck  shall  be  deemed 
stowed  under  deck.  Cargo  on  deck  free  from  claims  or  loss  by  wet, 
breakage,  leakage  or  exposure  and  liable  only  for  absolute  total  loss,  or 
a  part,  if  amounting  to  ten  per  cent. 

Attached  to   Policy   No of   the 

Dated 


FORM  40.    Insurance  Policy. 

The  following  is  a  typical  ocean  bill  of  lading 


WHITE  STAR  LINE 

30  James  St.,  Liverpool 

BOSTON  TO  LIVERPOOL 

84  State  Street,  Boston 

FORWARDING  CLAUSE:— ApplyinR  only  if  the  witliin  goods  arc  contracted  for   delivery'  Iwyond 
LIVERPOOL. 

The  goods  specified  in  this  Bill  c'  Lading  arc  to  be  forwarded  to 

hv at    the   rvni-nsp    of    the    Stcamshin    Pomnanv.    but    Suhiprf    tll      ihp  rnnrlit:on.. 


FOEWAEDING    CLAUSE :— Applying    only    if    the    within    goods    are 
contracted  for  delivery  beyond  LIVEEPOOL. 

The    goods    specified    in    this   Bill    of    Lading    arc    to    be    forwarded    to 

by at    the    expense    of 

the  Steamship  Company,  but  subject  to  the  conditions  of  carriage  of  the 
Carrier  by  wliom  the  goods  are   forwarded.     Upon  delivery   of   the  goods 


DELIVERY   OF   EXPORT  ORDERS  635 

from  the  ship's  tackle  at  LIVERPOOL  the  Steamship  Company  ceases  to 
act  as  carrier,  but  is  constituted  forwarding  agent  without  responsibility. 
The  through  freiglit  is  charged  in  respect  of  and  includes  only  the  ordinary 

expenses    of   transit    to Rates 

being  owner 's  risk  rates  when  same  are  quoted  by  carrier  by  whom  the 
goods  are  forwarded.  In  event  of  the  usual  means  of  conveyance  from 
LIVERPOOL  to  the  place  of  destination  and  tlie  delivery  of  the  goods 
thereat  being  delayed,  impeded,  interrupted  or  suspended,  the  Steamship 
Company  may  in  its  sole  discretion  and  option,  forward  the  goods  to  the 
nearest  available  place,  this  to  be  considered  a  final  delivery,  or  may  store 
and  warehouse  the  goods.  The  charges  and  expenses  connected  therewith, 
and  any  other  charges  incurred  by  the  Steamship  Company  in  addition  to 
such  ordinary  expenses  of  carriage  and  transshipment  shall  be  paid  by  the 
consignee,  and  the  Steamship  Company  may  exercise  a  lien  on  the  goods 
until  such  expenses  are  paid,  and  may  sell  the  goods  if  payment  be  not 
made  within  seven  days  after  demand.  Interest  at  rate  of  5%  will  be 
charged,  and  all  expenses  and  charges  under  the  aforesaid  lien  and  right 
of  sale  shall  be  extended  to  secure  payment  of  interest. 

SHIPPER'S  MARKS 


NOTIFICATION  CLAUSE.— Also,  no  claims  shall,  under  any  circum- 
stances whatever,  attach  to  the  steamer  or  her  owners,  for  failure  to  notify 
consignees  of  arrival  of  goods. 

Ft- in.  @ per   cub.    ft.     $ 

Ft- in.  @ per   cub.    ft.     $ 


.per  2240  lbs.  $. 

@ per     Barrel,  $ . 

.  lbs.  @ per  100  lbs.,  $ . 

-lbs.  @ per  100  lbs.,  $. 

Charges, 

Total  Gold  $. 


Said  to  weigh lbs.  gross. 


B/L  No 

RECEIVED,  in  apparent  good  order  and  condition,  from 

to    be   transported    by   the 

Steamship now   lying   at   the   port   of   BOSTON 

and  bound  for  the  port  of  LIVERPOOL,  or  as  near  thereto  as  she  may 
safely  get,  with  liberty  for  the  carrier,  in  its  discretion,  before  or  after 
shipment  or  loading,  to  ship  the  whole  or  any  part  of  the  goods  by  any 
other  steamship  or  steamships  although  prior  or  subsequent,  either  of  this 
Line  or  any  other  Line,  or  independent  steamers,  witli  liberty  in  addition 


636     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

to  any  liberty  expressed  or  implied  in  this  bill  of  lading,  for  such  steam- 
ship or  substituted  steamship,  either  before  or  after  proceeding  towards 
the  port  of  destination  above  named,  to  proceed  to  or  return  to  and  stay 
at  any  ports  or  places  whatsoever,  including  any  in  contrary  directions  to 
or  out  of  or  beyond  the  eustonuiry  or  advertised  route,  once  or  oftener  in  any 
order,  backwards  or  forwards,  for  the  purpose  of  trading,  or  for  any 
other  purposes  whatsoever,  and  all  such  ports,  places  and  sailings  shall  be 
deemed  included  in  the  intended  voyage,  and  to  carry  goods  of  all  kinds, 
dangerous  or  otherwise,  and  to  carry  Live  Stock  and/or  cargo  on  deck. 
SAID   TO  WEIGH   GEOSS 


being  marked  and  numbered  as  per  margin,  shipper's  weight  (quality, 
(juantity,  gauge,  weight,  contents  and  value  unknown),  and  to  be  delivered 
in  like  good  order  and  condition  at  the  port  of  LIVEEPOOL  or  as  near 
thereto  as  she  may  safely  get,  under  order  of 

or  to  his  or  their  assigns,  he  or  they  paying  freight,  primage  and  charges, 
as  per  margin,  immediately  on  discharge  of  the  goods,  without  any  allow- 
ance or  credit  or  discouat. 

Notwithstanding  anything  to  the  contrary  that  may  be  printed  or  written 
herein,  all  freights  collectable  under  this  bill  of  lading,  including  any  short- 
paid  freight,  are  payable  in  currency  of  the  country  of  the  port  of  dis- 
charge, converted  at  the  current  sight  rate  of  exchange  at  port  of  dis- 
charge on  the  date  of  vessel's  entry  at  the  Custom  House  at  the  port  of 
discharge. 

1.  (a)  IT  IS  MUTUALLY  AGREED  that  the  steamer  shall  have  liberty 
to  sail  with  or  without  pilots;  to  tow  and  assist  vessels  in  distress;  to 
deviate  for  the  purpose  of  saving  life  or  property;  that  the  carrier  shall 
have  liberty  to  convey  goods  in  lighters  and/or  craft  to  and  from  the 
steamer,  at  the  risk  of  the  owners  of  the  goods ;  and,  in  case  the  steamer 
shall  put  into  a  port  of  refuge,  or  be  prevented  from  any  cause  from  pro- 
ceeding in  the  ordinary  course  of  her  voyage,  to  transship  the  goods  to 
their  destination  by  any  other  steamer.  Also  that  the  carrier  is  at  liberty 
at  any  time  and  place  before  or  after  sailing  or  after  arrival  at  port  of  dis- 
charge to  jjut  the  vessel  in  dry-dock  for  any  purposes  whatsoever,  with  the 
whole  or  any  part  of  the  cargo  shipped  hereunder  on  board,  and  such  dock- 
ing shall  not  be  deemed  a  deviation. 

(b)  The  carrier  shall  not  be  liable  as  carrier  or  otherwise  for  loss  or 
damage  occasioned  by  perils  of  the  sea  or  other  waters,  by  fire  from  any 
cause  or  wheresoever  occurring,  by  theft  or  pilferage,  by  barratry  of  the 
master  or  crew,  or  by  act  of  God;  by  enemies,  pirates  or  robbers;  by  arrest 
or  restraint  of  princes,  rulers,  or  people,  riots,  strikes,  or  stoppage  of 
labor;  by  explosion,  ))ursting  of  boilers,  breakage  of  shafts  or  any  latent 
defect  in  hull,  machinery,  or  appurtenances,  or  unseaworthiness  of  the 
steamer,  wliether  existing  at  time  of  shipment  or  at  the  beginning  of  the 
voyage,  provided  the  owners  have  exercised  due  diligence  to  make  the 
steamer  seaworthy;  by  heating,  frost,  decay,  putrefaction,  rust,  sweat, 
change  of  character,  drainage,  leakage,  by  stowage  or  contact  with  or  by 
smell,  evaporation,  leakage,  escape  of  contents,  or  taint,  of  other  goods, 
the  vessel  being  privileged  to  carry  any  other  articles,  although  hazardous 


DELIVERY  OF  EXPORT  ORDERS  637 

or  contraband,  by  breakage,  vermin-,  or  by  explosion  of  any  of  the  goods, 
whether  shipped  with  or  without  disclosure  of  their  nature,  or  for  any  loss 
or  damage  arising  from  the  nature  of  the  goods  or  the  insufficiency  of  the 
packages ;  nor  for  land  damage ;  nor  for  the  obliteration,  errors,  insufficiency, 
or  absence  of  marks,  numbers,  address,  or  description;  nor  for  risk  of 
craft,  hulk  or  transshipment;  nor  for  any  loss  or  damage  caused  by  pro- 
longation of  the  voyage;  nor  shall  the  carrier  be  concluded  as  to  correctness 
of  statements  herein  of  quality,  quantity,  gauge,  contents,  weight  and 
value. 

(c)  General  Average  shall  be  adjusted  according  to  York- Antwerp  Kules 
of  1890,  and  as  to  matters  not  therein  provided  for,  according  to  usages  at 
port  of  adjustment,  and  shall  be  adjusted  at  the  port  of  New  York  or  last 
port  of  discharge,  at  carrier's  option.  If  the  shipowner  shall  have  exer- 
cised due  diligence  to  make  the  vessel  in  all  respects  seaworthy  and  to  have 
her  properly  manned,  equipped,  and  supplied,  it  is  hereby  agreed  that  in  case 
of  danger,  damage  or  disaster  resulting  from  default  or  error  in  navigation 
or  in  the  management  of  the  vessel  or  from  any  latent  or  other  defect  in  the 
vessel,  her  machinery  and  appurtenances,  or  from  unseaworthiness,  although 
existing  at  time  of  shipment,  or  at  the-  beginning  of  the  voyage  (provided 
the  defect  or  unseaworthiness  was  not  discoverable  by  the  exercise  of  due 
diligence)  the  shippers,  consignees  or  owners  of  the  cargo  shall  nevertheless 
pay  salvage  and  any  special  charges  incurred  in  respect  of  the  cargo  and 
shall  contribute  with  the  shipowners  in  general  average  to  the  payment  of 
any  sacrifices,  losses  or  expenses  of  a  general  average  nature  that  may  be 
made  or  incurred  for  the  common  benefit  or  to  relieve  the  adventure  from 
any  common  peril.  In  ease  of  salvage  services  rendered  to  aforesaid  mer- 
chandise or  treasure  during  the  voyage  by  a  vessel  of  the  same  line,  such 
salvage  services  shall  be  paid  for  as  fully  as  if  such  salving  vessel  or  vessels 
belonged  to  strangers.  Passengers'  effects,  if  any,  not  to  contribute  in 
General  Average,  but  claims  for  passengers '  effects  sacrificed  to  be  allowed 
in  general  average,  less  their  proper  contribution  in  such  case. 

2.  The  shipment  is  subject  to  all  the  terms  and  provisions  of  the  Act  of 
Congress  of  the  United  States,  approved  February  13,  1893,  entitled  "An 
Act  Relating  to  the  Navigation  of  Vessels,'.'  etc.,  and  of  Sections  4282  to 
4287,  each  inclusive,  of  the  United  States  Revised  Statutes.  The  carrier 
shall  not  be  liable  for  gold  or  other  precious  metals,  precious  stones,  bills, 
notes,  or  securities,  documents,  pictures,  glass,  china,  silk,  furs,  laces  or 
any  of  the  articles  enumerated  in  Section  4281  of  the  United  States  Re- 
vised Statutes,  except  in  accordance  with  such  Statute,  and  unless  written 
notice  of  the  character  and  value  thereof  at  the  time  of  loading  has  been 
given  and  entry  thereof  made  on  the  bill  of  lading. 

3.  It  is  also  mutually  agreed  that  unless  a  higher  value  be  stated 
herein,  and  declared  herein  to  be  the  basis  of  adjustment  of  freight, 
and  extra  freight  as  may  be  agreed  on  paid,  the  value  of  any 
package  shipped  hereunder  does  not  exceed  $15,  per  cubic  foot,  or  $30  per 
hundred  weight,  or  in  any  case  $150,  per  package,  and  the  freight  thereon 
has  been  adjusted  on  the  basis  of  such  valuation.  In  computing  any 
liability  of  the  carrier  in  respect  of  the  goods,  no  value  shall  be  placed 
thereon  higher  than  the  market  price  at  the  port  of  destination  on  day  of 
steamer 's  entry  at  the  Custom  House,  less  all  charges  saved,  or  the  invoice 
value  of  the  goods  less  all  charges  saved,  whichever  amount  shall  be  the 
least,  not  exceeding  however  the  values  aforesaid,  viz:  $15,  per  cubic  foot, 
or  $30,  per  hundred  weight,  or  in  any  case  $150,  per  package,  (or  such  other 
value  as  may  be  stated  herein  as  the  basis  of  freight),  or  the  proportionate 
part  of  such  price  or  value  in  case  of  any  partial  loss  or  damage.  The 
freight  payable  as  above  has  been  calculated  and  based  upon  a  description 


638     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

of  the  goods  declared  by  the  shipjjer  to  the  shipowner.  The  shipper  war- 
rants the  correctness  of  such  description.  If  such  description  shall  prove 
to  be  untrue  or  incomplete  the  shipper  and/or  consignee  shall  be  liable  to 
pay  to  the  shipowner  as  and  by  way  of  liquidated  damages  and  not  as  a 
penalty  a  sum  equal  to  full  freight  on  such  packages  shipped  or  £10  Sterling 
per  ton,  whichever  shall  be  the  greater. 

4.  ALSO,  that  all  claims  for  short  delivery,  loss,  damage  or  of  whatso- 
ever nature,  must  be  made  in  writing  to  the  steamer 's  agent  at  the  port 
of  destination  of  steamer  Avithin  ninety  days  after  delivery  of  the  goods 
to  the  carrier  at  port  of  shipment,  and  in  case  of  damage  ALWAYS  BE- 
FORE the  goods  are  removed  from  the  custody  of  the  carrier,  and  in  case 
such  claim  shall  not  be  presented  in  writing  within  said  time  and  at  said 
place,  same  shall  be  waived  and  the  carrier  discharged  therefrom.  No  suit 
or  proceedings  to  recover  under  this  bill  of  lading,  or  in  respect  of  the 
goods,  shall  be  maintained  unless  commenced  within  six  months  after  de- 
livery of  the  goods  to  the  carrier  at  port  of  shipment  and  the  lapse  of 
such  period  shall  be  a  bar  to  recovery  in  any  suit  or  proceedings  not 
sooner  commenced,  notwithstanding  the  carrier  may  be  a  non-resident  or 
a  foreign  corporation.  Nothing  shall  be  deemed  a  waiver  of  the  provisions 
of  this  section,  except  a  written  express  waiver  signed  by  the  carrier. 

5.  ALSO,  in  case  of  any  loss  or  damage  for  which  the  carrier  shall  be 
liable,  the  carrier  shall  to  the  extent  of  such  liability  have  the  full  benefit 
and  be  subrogated  to  all  the  rights  of  the  insured  in  respect  of  any  insur- 
ance that  may  have  been  effected  upon  the  goods  or  against  said  loss  or 
damage  and  as  well  also  of  any  payment  or  loan  to  insured  by  under- 
writers although  repayable  only  out  of  recovery  against  the  carrier  not- 
withstanding the  underwriters  were  not  obligated  to  make  such  payment 
or  loan. 

6.  ALSO,  in  the  case  of  the  entry  of  the  port  of  discharge  or  communi- 
cation therewith,  rendering  or  being  liable  to  render  the  vessel  liable  to 
quarantine  at  any  subsequent  port,  or  in  case  of  the  master  or  carriers 
considering  the  entry  of  any  port,  either  from  epidemic  or  otherwise, 
unsafe  or  injurious  to  the  further  prosecution  of  the  steamer's  intended 
voyage,  the  goods  may  be  landed  or  put  into  lazaretto,  hulk,  lighter,  or 
other  vessel  at  any  other  available  port  the  master  or  carriers  may  consider 
safe,  at  cargo  owner's  risk  and  expense,  and  thereupon  the  liability  of 
the  steamer  or  carrier  hereunder  shall  absolutely  cease.  In  the  event  of 
quarantine,  the  goods  may  be  discharged  on  arrival  into  quarantine,  depot, 
hulk,  lighter  or  other  vessel  necessary  for  the  ship 's  despatch,  at  the 
cargo  owner's  risk  and  expense,  or  the  master  may  carry  on  the  goods  to 
the  nearest  convenient  port  and  there  land  them.  Advices  mailed  to  con- 
signees, if  named,  or  otherwise  to  shippers,  shall  be  deemed,  under  this 
agreement,  a  due  delivery  of  said  goods. 

7.  ALSO,  that  if  on  account  of  weather,  lockouts,  labor  troubles,  strikes, 
whether  of  carrier 's  employees  or  others,  earthquake,  epidemic,  interdict, 
prohibition  of  importation,  riot,  war  or  other  disturbance,  or  any  cause 
beyond  the  control  of  the  carriers,  or  by  reason  of  any  of  the  excepted 
causes  mentioned  elsewhere  in  this  bill  of  lading,  it  shall  be  impossible  or 
unsafe,  in  the  opinion  of  the  master  or  carriers,  to  enter  or  to  unload  said 
goods,  as  a  whole  or  part,  at  the  port  of  discharge  or  delivery,  the  same 
shall  be  carried  to  a  convenient  port  of  discharge  for  transshipment  to 
destination,  or  retained  on  board  for  delivery  upon  return  at  the  master's 
or  carrier's  option,  but  at  the  risk  and  expense  of  the  owner  of  said  goods. 
Lf  landed  at  the  next  convenient  x'ort,  advices  mailed  to  consignees,  if 
named,  or  otherwise  to  shippers,  shall  be  deemed,  under  this  agreement, 
a  due  delivery  of  said  goods. 

8.  ALSO,  that  the  steamer  may  commence  discharging  immediately  on 
arrival,    without   notice,    and    discharge    continuously,    any    custom    of   the 


DELIVERY  OF  EXPORT  ORDERS  639 

port  to  the  contrary  notwithstanding,  the  collector  of  the  port  being 
liereby  authorized  to  grant  a  general  order  for  discharge  immediately  on 
arrival;  and  if  the  goods  be  not  taken  from  the  steamer  by  the  consignees 
directly  they  come  to  hand  in  discharging  the  steamer,  the  master  or 
steamer's  agent  to  be  at  liberty  to  enter  and  land  the  goods,  or  put  them 
into  craft  or  store  at  the  cargo  owner's  risk  and  expense,  when  the  goods 
shall  be  deemed  delivered  and  steamer's  responsibility  ended. 

9.  ALSO,  that  shippers  shall  be  liable  for  any  loss  or  damage  to  steamer, 
cargo,  lighter,  wharf,  or  other  property,  whether  owned  by  the  steamship 
owner  and/or  carrier  or  not,  caused  by  inflammable,  explosive,  or  dan- 
gerous goods  shipped  without  full  disclosure  of  their  nature,  whether  such 
shipper  be  principal  or  agent ;  and  such  goods  may  be  thrown  overboard 
or  destroyed  at  any  time  without  compensation.  Extra  charges,  if  any, 
for  discharging,  lighterage,  or  other  expenses  on  dangerous  goods,  declared 
or  considered  as  such  by  civil  or  military  authorities,  or  by  the  carrier, 
must  be  borne  by  shippers  and/or  consignees. 

10.  ALSO,  that  merchandise  on  wharf  or  lighter  awaiting  shipment  or 
delivery  is  at  cargo  owner 's  risk  of  loss  or  damage  not  happening  through 
the  fault  or  negligence  of  the  carrier,  master,  agent,  or  manager  of  the 
steamer,  any  local  customs,  or  privileges  to  the  contrary  notwithstanding. 

11.  ALSO,  that  the  steamer  and  carrier  shall  have  a  lien  on  and  the 
right  to  sell  the  goods  for  all  freights,  primages  and  charges,  including 
all  previously  unsatisfied  freights,  primages  and  charges  due  to  the  carrier 
from  the  shippers  or  consignees  in  respect  of  other  goods  by  the  same 
or  other  steamers,  whether  payable  in  advance  at  port  of  shipment  or  not, 
and  also  for  the  cost  of  any  necessary  mending,  baling,  cooperage  or 
repairs,  and  for  any  expenses  or  costs  incurred,  charges  or  moneys  due, 
under  any  clause  in  this  bill  of  lading,  and  also  for  all  fines  or  damages 
which  the  steamer  or  cargo  may  incur  or  suffer  by  reason  of  the  illegal, 
incorrect  or  insufficient  marking,  numbering  or  addressing  of  packages 
or  description  of  their  contents,  and  also  for  the  costs  and  expenses  of 
exercising  any  lien  and  of  any  sale  of  the  goods.  Freights,  primages  and 
charges  and  any  other  dues,  costs,  charges  and  expenses  payable  under  this 
or  any  other  clause  of  this  bill  of  lading,  if  not  paid  within  seven  days 
from  the  final  discharge  of  the  Ship,  shall  bear  interest  at  the  rate  of  5% 
per  annum  until  paid,  and  the  lien  and  right  of  sale  above  mentioned  shall 
be  extended  to  secure  payment  of  interest.  Bills  of  lading  must  be  made 
out  in  accordance  with  the  prescriptions  and  regulations  of  Port,  Customs 
and  Consular  authorities.  Consular,  Board  of  Health,  or  other  certificates 
required  to  accompany  the  goods  are  to  be  procured  by  shippers,  and  any 
detention,  charges  or  penalties  accruing  to  steamer  or  cargo,  owing  to 
the  want  of  such  certificates,  shall  be  borne  by  the  shippers  and/or  con- 
signees. Steamer  will  not  be  responsible  for  delay,  in  the  delivery  of  goods 
not  plainly  marked  wuth  the  port  of  destination. 

12.  ALSO,  all  tonnage  and  shed  dues,  if  any,  are  payable  by  consignees. 

13.  ALSO,  that  full  freight  is  payable  on  damaged  or  unsound  goods; 
but  no  freight  is  due  on  any  increase  in  bulk  or  weight  caused  by  the 
absorption  of  water  during  the  voyage. 

14.  ALSO,  that  the  steamer  has  the  privilege  of  reweighing  or  remea- 
suring  any  goods  where  doubt  exists  as  to  the  correctness  of  weights  or 
measures,  and  freight  shall  be  payable  upon  any  excess  weight  or  measure- 
ment. The  expenses  of  reweighing  or  remeasuring  shall  be  paid  by  the 
party  in  error. 

15.  ALSO,  freight  intended  to  be  prepaid  is  fully  and  irrevocably  earned 
upon  receipt  of  the  goods  for  shipment,  and  shall  not  be  refunded  in  whole 
or  in  part  if  prepaid,  and  shall  be  payable  without  deduction  if  unpaid, 


640     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

in  any  circumstances  whatsoever  and  whether  or  not  the  goods  liave  been 
loaded  or  the  voyage  begun. 

16.  ALSO,  that  if  on  a  sale  of  the  goods  at  destination  for  freight, 
primage  and  charges,  or  other  dues,  costs,  charges  or  expenses  payable 
under  any  clause  of  this  bill  of  lading  and  interest,  the  proceeds  are  in- 
sufficient, the  carrier  shall  be  entitled  to  recover  the  difference  from  tlie 
shipper. 

17.  ALSO,  that  single  packages  exceeding  one  ton  in  weight  shall  be 
liable  to  pay  extra  charges,  if  any,  for  loading,  handling,  transshipping  or 
discharging;  and  in  case  of  any  damage  or  loss  resulting  to  the  steamer, 
cargo,  lighters,  cranes  or  hoisting  tackle,  owing  to  incorrect  weight  or  no 
weight  having  been  declared,  the  shippers  and/or  consignees  of  sueli  cargo 
shall  be  responsible  for  such  loss  or  damage. 

18.  ALSO,  that  this  bill  of  lading,  duly  endorsed,  be  given  up  to  tlie 
steamer 's  agent  in  exchange  for  a  delivery  order. 

19.  ALSO,  that  parcels  for  different  consignees  collected  or  made  up  in 
single  packages  addressed  to  one  consignee  pay  full  freight  on  each  parcel. 

20.  ALSO,  if  any  bagged  or  baled  goods  are  landed  slack  or  torn,  the 
consignee  shall  accept  a  proportionate  part  of  the  sweepings,  and  the  same 
shall  be  deemed  a  full  settlement  of  any  claim  for  loss  in  weight. 

21.  ALSO,  that  for  metal  in  slabs,  bars,  ingots,  rods,  hoops,  plates,  etc., 
or  any  other  article  not  properly  packed  but  shipped  loose  or  in  bundles, 
the  carrier  is  not  responsible  for  loss  through  breakage  nor  for  the  re- 
spective marks  and/or  weight  and/or  measurement,  nor  for  loss  of  broken 
pieces. 

22.  ALSO,  that  the  carrier  shall  not  be  liable  for  splits,  dog  holes, 
shakes,  stains  or  breakage  to  Lumber  or  Logs. 

23.  ALSO,  that  where  grain  is  stowed  together  with  other  grain  without 
separation,  either  from  the  same  or  another  shipper,  each  bill  of  lading 
shall  bear  its  proportion  of  loss  and/or  damage,  if  any. 

24.  ALSO,  that  unclaimed  goods  not  otherwise  accounted  for  shall  at 
carrier's  option,  be  apportioned  to  the  different  consignees  of  like  goods, 
according  to  the  shortages,  and  be  aecejited  as  good  delivery  to  the  extent 
thereof,  and  if  any  consignee  has  a  shortage  in  marks  or  numbers  called 
for  herein,  unclaimed  goods  of  like  kind  but  of  different  marks  or  numbers 
shall,  at  carrier 's  option,  be  deemed  to  constitute  a  part  of  the  goods  and 
be  accepted  by  consignees  and/or  assigns  as  good  delivery  hereunder. 

25.  ALSO,  in  no  case  shall  the  total  liability  of  the  carrier  to  all 
claimants  in  respect  of  damages  arising  from  any  one  casualty  exceed  the 
value  of  the  owner's  interest  in  the  steamer,  or  her  wreck  and  pending 
freight. 

26.  ALSO,  that  nothing  herein  contained  shall  deprive  the  carriers  of 
the  right  to  claim  the  benefit  of  any  British,  American  or  other  statutory 
exemption   from   or   limitation   of   liability. 

27.  ALSO,  that  the  Master  porterage  at  Liverpool  is  to  be  performed 
by  the  consignee  of  the  steamer,  and  the  expense  thereof  to  be  paid  by  the 
receivers  or  consignees  of  the  cargo. 

AND  FINALLY  in  accepting  this  Bill  of  Lading,  the  sliipper,  owner, 
and  consignee  of  the  goods  and  the  holder  of  the  Bill  of  Lading  agree  to 
be  bound  by  all  of  its  stipulations,  exceptions,  and  conditions,  whether 
written  or  printed,  as  fully  as  if  they  were  all  signed  by  such  shipper, 
owner,  consignee,  or  holder,  any  local  customs  or  privileges  to  the  contrary 
notwithstanding. 

IN   WITNESS   WHEREOF,   the   master   or   agent   of   the   said   steamer 

hath  affirmed  to Bills  of  Lading,  all  of  this  tenor  and  date, 

one  of  wliich  being  accomplished  the  others  to  stand  void. 


DELIVERY  OF   EXPORT  ORDERS  64,1 

Dated  in  BOSTON  this day  of 192 

For  tlie  WHITE  STAE  LINE 


ATTENTION   OF   SHIPPERS    IS    CALLED    TO    SEC.    235   OF    THE 
CEIMINAL  CODE   OF  THE  UNITED  STATES    (ACT  OF  CON- 
GRESS  MARCH   4tli,   1909). 

Every  package  containing  explosives  or  other  dangerous  articles,  when 
presented  to  a  common  carrier  for  shipment  shall  have  plainly  marked 
on  the  outside  thereof  the  contents  thereof ;  and  it  shall  be  unlawful  for 
any  person  to  deliver  or  cause  to  be  delivered  to  any  common  carrier  en- 
gaged in  interstate  or  foreign  commerce  by  land  or  water,  for  interstate 
or  foreign  transportation,  or  to  carry  upon  any  vessel  or  vehicle  engaged 
in  interstate  or  foreign  transportation  any  explosive  or  other  dangerous 
article  under  any  false  or  deceptive  marking,  description,  invoice,  shipping 
order  or  other  declaration,  or  without  informing  the  agent  of  such  carrier 
of  the  true  character  thereof,  at  or  before  the  time  such  delivery  for 
carriage  is  made.     Whoever  shall  knowingly  violate  or  cause  to  be  violated 

any   provision    of    this    section shall    be   fined    not    more    than 

$2,000  or  imprisoned  not  more  than  eighteen  months  or  botli. 


FORM  41.     Ocean  Bill  of  Lading 

On  Sept.  3,  1921  important  new  rules  on  the  bill  of  lad- 
ing were  passed  by  the  International  Law  Association  at 
The  Hague.  These  rules  have  been  adopted  by  the  con- 
ference with  respect  to  west-bound  Atlantic  shipments 
and  are  now  in  effect.    The  rules  read  as  follows : 

Article  I. — Definitions. 

In  these  rules 

a.  "Carrier"  includes  the  owner  or  the  charterer  who  enters 
into  a  contract  of  carriage  with  a  shipper. 

b.  ' '  Contract  of  carriage ' '  means  a  bill  of  lading  or  any  simi- 
lar document  of  title  in  so  far  as  such  document  relates  to 
the  carriage  of  goods  by  sea. 

c.  "Goods"  includes  goods,  wares,  merchandise  and  articles 
of  every  kind  whatsoever  except  live  animals  and  cargo  carried 
on  deck. 

d.  "Ship"  includes  anj^  vessel  used  for  the  carriage  of  goods 
by  sea. 

e.  ' '  Carriage  of  goods ' '  covers  the  period  from  the  time  when 
the  goods  are  received  on  the  ship's  tackle  to  the  time  when 
they  are  unloaded  from  the  ship's  tackle. 

Article  II. — Risks. 

Subject  to  the  provisions  of  Article  V,  under  which  every 
contract  of  carriage  of  goods  by  sea  the  carrier,  in  regard  to  the 


642     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

handling,  loading,  stowage,  carriage,  custody,  care  and  unload- 
ing of  such  goods,  shall  be  subject  to  the  responsibilities  and 
liabilities  and  entitled  to  the  rights  and  immunities  hereinafter 
set  forth. 

Article  III, — Responsibilities  and  Liabilities. 

First.  The  carrier  shall  be  found  before  and  at  the  begin- 
ning of  the  voyage  to  exercise  due  diligence  to 

a.  Make  the  ship  seaworthy. 

b.  Properly  man,  equip  and  supply  the  ship. 

c.  Make  the  holds,  refrigerating  and  cool  chambers  and  other 
parts  of  the  ship  in  which  goods  are  carried  fit  and  safe  for  their 
reception,  carriage  and  preservation. 

Second.  The  carrier  shall  be  bound  to  provide  for  the  proper 
and  careful  handling,  loading,  stowage,  carriage,  custody,  care 
and  unloading  of  the  goods  carried. 

Third.  After  receiving  the  goods  into  his  charge  the  carrier, 
or  the  master  or  agent  of  the  carrier  shall,  on  the  demand  of 
the  shipper,  issue  a  bill  of  lading  showing,  amongst  other  things : 

a.  The  leading  marks  necessary  for  identification  of  the  goods 
as  the  same  are  furnished  in  wa-iting  by  the  shipper  before  the 
loading  starts,  provided  such  marks  are  stamped  or  otherwise 
shown  clearly  upon  the  goods  if  uncovered,  or  on  the  cases  or 
coverings  in  which  such  goods  are  contained,  in  such  a  manner 
as  will  remain  legible  until  the  end  of  the  voyage. 

b.  The  number  of  packages  or  pieces,  or  the  quantity  or 
weight,  as  the  case  may  be,  as  furnished  in  writing  by  the 
shipper  before  the  loading  starts. 

Order  and  Condition. 

c.  The  apparent  order  and  condition  of  the  goods. 
Provided  that  no  carrier,  master  or  agent  of  the  carrier  shall 

be  bound  to  issue  a  bill  of  lading  showing  description,  marks, 
number,  quantity  or  weight  which  he  has  reasonable  ground  for 
suspecting  do  not  accurately  represent  the  goods  actually  re- 
ceived. 

4.  Such  a  bill  of  lading  issued  in  respect  of  goods  other  than 
goods  carried  in  bulk  and  whole  cargoes  of  timber  shall  be 
prima  facie  evidence  of  the  receipt  by  the  carrier  of  the  goods 
as  therein  described  in  accordance  wdth  section  3  (a),  (b)  and 
(c).  Upon  anj^  claim  against  the  carrier  in  the  case  of  goods 
carried  in  bulk  or  whole  cargoes  of  timber  the  claimant  shall 
be  bound,  notwithstanding  the  bill  of  lading,  to  prove  the  num- 
ber, quantity  or  weight  actually  delivered  to  the  carrier. 


DELIVERY  OF   EXPORT   ORDERS  613 

5.  The  shipper  shall  be  deemed  to  have  guaranteed  to  the 
carrier  the  accuracy  of  the  description,  marks,  number,  quantity 
and  weight  as  furnished  by  him,  and  the  shipper  shall  indemnify 
the  carrier  against  all  loss,  damages  and  expenses  arising  or 
resulting  from  inaccuracies  in  such  particulars. 

IMusT  Make  Claim. 

6.  Unless  written  notice  of  a  claim  for  loss  or  damage  and 
the  general  nature  of  such  claim  be  given  in  writing  to  the 
carrier  or  his  agent  at  the  port  of  discharge  before  the  removal 
of  the  goods,  such  removal  will  be  prima  facie  evidence  of  the 
delivery  by  the  carrier  of  the  goods  as  described  in  the  bill  of 
lading,  and  in  any  event  the  carrier  and  the  ship  shall  be  dis- 
charged from  all  liability  in  respect  of  loss  or  damage  unless 
suit  is  brought  within  twelve  months  after  delivery  of  the  goods. 

7.  After  the  goods  are  loaded  the  bill  of  lading  to  be  issued 
by  the  carrier,  master  or  agent  of  the  carrier  to  the  shipper 
shall,  if  the  shipper  so  demands,  be  a  "shipped"  bill  of  lading, 
provided  that  no  "received  for  shipment"  bill  of  lading  or  other 
document  of  title  shall  have  been  previously  issued  in  respect 
of  the  goods. 

In  exchange  for  and  upon  surrender  of  a  "received  for  ship- 
ment" bill  of  lading  the  shipper  shall  be  entitled  when  the  goods 
have  been  loaded  to  receive  a  "shipped"  bill  of  lading. 

A  "received  for  shipment"  bill  of  lading  which  has  subse- 
quently been  noted  by  the  carrier,  master  or  agent  with  the  name 
or  names  of  the  ship  or  ships  upon  which  the  goods  have  been 
shipped  and  the  date  or  dates  of  shipment  shall  for  the  purpose 
of  these  rules  be  deemed  to  constitute  a  "shipped"  bill  of 
lading. 

8.  Any  clause,  covenant  or  agreement  in  a  contract  of  car- 
riage relieving  the  carrier  or  the  ship  from  liability  for  loss 
or  damage  to  or  in  connection  with  goods  arising  from  negli- 
gence, fault  or  failure  in  the  duties  and  obligations  provided  in 
this  article  or  lessening  such  liability  otherwise  than  as  pro- 
vided in  these  rules  shall  be  null  and  void  and  of  no  effect. 

Article  TV. — Rights  and  Immunities. 

1.  Neither  the  ship  nor  the  carrier  shall  be  liable  for  loss  or 
damage  arising  or  resulting  from  unseaworthiness  unless 
caused  by  want  of  due  diligence  on  the  part  of  the  carrier  to 
make  the  ship  seaworthy  and  to  secure  that  the  ship  is  properly 
manned,  equipped  and  supplied. 

2.  Neither  the  carrier  nor  the  ship  shall  be  responsible  for 
loss  or  damage  arising  or  resulting  from — 


644     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

(a)  act,  neglect  or  default  of  the  master,  mariner  or  pilot 
or  servants  of  the  carrier  in  the  navigation  or  in  the  manage- 
ment of  the  ship ; 

(b)  fire; 

(c)  perils,  clangers  and  accidents  of  the  sea  or  other  navigable 
waters ; 

(d)  act  of  God; 

(e)  act  of  war; 

(f)  act  of  public  enemies; 

(g)  arrest  or  restraint  of  princes,  rulers  of  people,  or  seizure 
under  legal  process ; 

(h)   quarantine  restrictions ; 

(i)  act  or  omission  of  the  shipper  or  owner  of  the  goods,  his 
agent  or  repi-esentative ; 

(j)  strikes  or  lockouts  or  stoppage  or  restraint  of  labor  from 
whatever  cause,  partial  or  general; 

(k)   riot  or  civil  commotions; 

(1)  saving  or  attempting  to  save  life  or  property  at' sea; 

(m)   inherent  defect,  quality  or  vice  of  the  goods; 

(n)   insufficiency  of  packing  ; 

(o)   insufficiency  or  inadequacy  of  marks; 

(p)  latent  defects  not  discoverable  by  due  diligence; 

(q)  any  other  cause  arising  without  the  actual  fault  or 
privity  of  the  carrier,  or  without  the  fault  or  neglect  of  the 
agent,  servants  or  employees  of  the  carrier. 

Deviation  for  Emergencies. 

3.  Any  deviation  in  saving  or  attempting  to  save  life  or  prop- 
erty at  sea  or  any  deviation  authorized  by  the  contract  of  car- 
riage shall  not  be  deemed  to  be  an  infringement  or  breach  of 
these  rules  or  of  the  contract  of  carriage,  and  the  carrier  shall 
not  be  liable  for  any  loss  or  damage  resulting  therefrom. 

4.  Neither  the  carrier  nor  the  ship  shall  be  responsible  in  any 
event  for  loss  or  damage  to  or  in  connection  with  goods  in  an 
amount  beyond  £100  per  package  or  unit,  or  the  equivalent  of 
that  sum  in  other  currency,  unless  the  nature  and  value  of  such 
goods  have  been  declared  by  the  shipper  before  the  goods  are 
shipped  and  have  been  inserted  in  the  bill  of  lading. 

By  agreement  between  the  carrier,  master  or  agent  of  the  car- 
rier and  the  shipper  another  maximum  amount  than  mentioned 
in  this  paragraph  may  be  fixed,  provided  that  such  maximum 
shall  not  be  less  than  the  figures  named. 


DELIVERY   OF   EXPORT  ORDERS  645 

The  declaration  by  the  shipper  as  to  the  nature  and  value 
of  any  goods  declared  shall  be  prima  facie  evidence,  but  shall  not 
be  binding  or  conclusive  on  the  carrier. 

5.  Neither  the  carrier  nor  the  ship  shall  be  responsible  in  any 
event  for  loss  or  damage  to  or  in  connection  with  goods  if  the 
nature  or  value  thereof  has  been  wilfully  misstated  by  the  ship- 
per. 

Dangerous  Goods. 

6.  Goods  of  an  inflammable  or  explosive  nature  or  of  a  dan- 
gerous nature,  unless  the  nature  and  character  thereof  have 
been  declared  in  writing  by  the  shipper  to  the  carrier  before 
shipment  and  the  carrier,  master  or  agent  of  the  carrier  has 
consented  to  their  shipment,  may  at  any  time  before  delivery 
be  destroyed  or  rendered  innocuous  by  the  carrier  without  com- 
pensation to  the  shipper,  and  the  shipper  of  such  goods  shall  be 
liable  for  all  damages  and  expenses  directly  or  indirectly  aris- 
ing out  of  or  resulting  from  such  a  shipment.  If  any  such 
goods  shipped  with  such  consent  shall  become  a  danger  to  the 
ship  or  cargo  they  may  in  like  manner  be  destroyed  or  rendered 
innocuous  by  the  carrier  without  compensation  to  the  shipper. 

7. — A  carrier  shall  be  at  liberty  to  surrender  in  whole  or  in 
part  all  or  any  rights  and  immunities  under  this  article,  pro- 
viding such  surrender  shall  be  embodied  in  the  bill  of  lading 
issued  to  the  shipper. 

Article  V. — Special  Conditions. 

Notwithstanding  the  provisions  of  the  preceding  articles,  a 
carrier,  master  or  agent  of  the  carrier  and  a  shipper  shall  in 
regard  to  any  particular  goods  be  at  liberty  to  enter  into  any 
agreement  in  any  terms  as  to  the  responsibility  and  liability  of 
the  carrier  for  such  goods,  and  as  to  the  rights  and  immunities 
of  the  carrier  in  respect  of  such  goods  or  his  obligations  as  to 
seaworthiness,  or  the  care  or  diligence  of  his  servants  in  han- 
dling, loading,  stowing,  custody,  care  and  unloading  of  the  goods 
carried  by  sea,  provided  that  in  this  case  no  bill  of  lading  shall 
be  issued  and  that  the  terms  agreed  shall  be  embodied  in  a 
receipt  which  shall  be  a  non-negotiable  document  and  shall  be 
marked  as  such. 

Any  agreement  so  entered  into  shall  have  full  legal  effect. 

Article  VI. — Limitations  on  the  Application  of  the  Rules. 

Nothing  herein  contained  shall  prevent  a  carrier  or  a  shipper 
from  entering  into  any  agreement,  stipulation,  condition,  reser- 
vation or  exemption  as  to  the  responsibility  and  liability  of  the 
carrier  or  the  ship  for  the  loss  or  damage  to  or  in  connection 


616     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

with  the  custody  and  care  and  handling-  of  goods  prior  to  the 
loading  on  and  subsequent  to  the  unloading  from  the  ship  on 
which  the  goods  are  carried  by  sea. 

Article  VIL — Limitation  of  Liability. 

The  provisions  of  these  rules  shall  not  affect  the  rights  and 
obligations  of  the  carrier  under  the  convention  relating  to  the 
limitation  of  the  liability  of  owners  of  sea-going  vessels. 

For  a  discussion  of  these  rules,  cf.  Commerce  Report-s — May  8,  1922,  p. 
374,  and  May  15,  1922,  page  439;  also  the  address  of  Charles  S.  Haight  at 
the  1922  convention  of  the  National  Foreign  Trade  Council — ' '  The  Hague 
Rules,  1921."  It  is  probable  that  the  bill  of  lading  to  be  adopted  by  the 
Shipping  Board  standard  will  not  follow  the  Hague  Rules  in  some  particu- 
lars. 

On  the  general  subject  of  marine  insurance,  consult  the  following:  Gow, 
Sea  Insurance  According  to  British  Statute;  Winter,  Marine  Insurance ; 
Huebner,  Marine  Insurance ;  Rush,  Marine  Insurance   (Hull)  ;  and 

The  World's  Markets. 

July    1919,    p.    32 — "Marine    Insurance    Risks    Within    Xew    York 

Harbor. ' ' 
Aug.  1919,  p.  24— "Fixing  Marine  Insurance  Rates." 

Export  Trade  4'  Exporters'  Review. 

May  28,  1921,  p.  20 — "Elementary  Features  of  a  Marine  Insurance 

Policy. " 
Nov.  19,  1921,  p.  9— "How  the  Courts  View  the  1  in  C.  I.  F. " 
Feb.  4,  1922,  p.  5— "Wliat  the  Export  Manager  Should  Know  About 

Marine  Insurance." 
Feb.  18,  1922,  p,  5 — "Elementary  Features  of  General  Average." 
Mar.  18,  1922,  p.  5 — "The  'Wareliouse  to  Warehouse  Cover'  in  Ma- 
rine Insurance. ' ' 
Apr.  1,  1922,  p.  5 — "The  Simpler  Features  of  Particular  Average." 
Apr.  1.5,  1922,  p.  5 — "Special  Considerations  on  Particular  and 
General  Average. ' ' 

Proceedings    of   conventions    of    National    Foreign    Trade    Convention. 

1918,  p.   367,   Hendon   Chubb — "Development   of   American   Marine 
Insurance. ' ' 

1919,  p.  487,  Benjamin  Rush — "Marine   Insurance." 

1920,  p.   564,   Hendon  Chubb — "American   Marine   Insuraiu'c. " 

1921,  p.   401,  Wm.   D.   Winter — "Problems   of   Marine   Insurance." 

1922,  p.  221,  W.  H.  La  Boyteaux— "Vital   Points  in   Marine    Insur- 
ance Policies. ' ' 


DELIVERY   OF   EXPORT   ORDERS  617 

Addenda  3  (see  page  600)  : 

*The  following  extract  from  an  address  by  W.  H. 
LaBoyteaux  at  the  1922  convention  of  the  National  For- 
eign Trade  Convention  may  be  of  assistance  in  jjreparing 
the  set  of  instructions : 

The  Marine  Insurance  Policy:  Althou^'h  there  is  no  ac- 
cepted standard  form  of  marine  insurance  policj^  in  use  in  the 
United  States  for  the  insurance  of  cargo  for  ocean  voyages,  the 
policies  issued  hj  all  the  established  companies  have  a  certain 
degree  of  uniformity  and  are  generally  similar  in  respect  to 
the  major  risks  insured.  These  policies  include  coverage  against 
a  number  of  risks  other  than  perils  of  the  sea,  but  they  do  not 
furnish  protection  against  any  and  every  loss  or  damage  -which 
the  cargo  insured  may  sustain  during  the  insured  period  of 
transit.  On  the  contrary,  they  cover  only  for  such  loss  or  dam- 
age as  is  caused  by  those  certain  risks  or  perils  against  which 
the  insurer  agrees  in  the  policy  to  insure,  and  subject  to  the 
limitations  upon  the  liability  of  the  insurer  as  are  contained  in 
the  policy. 

The  Risks  and  Perils  Usually  Insured  Are:  Perils  of  the 
sea  (heavy  weather,  stranding,  sinking,  collision,  striking  the 
ground,  rock  or  obstructions,  etc.)  fire,  pirates,  assailing  thieves, 
jettison,  barratry  of  master  and  mariners  and  like  causes. 

The  risk  of  "assailing  thieves"  does  not  include  theft  and 
pilferage  which  risks,  if  insured,  must  be  included  in  the  policy 
by  special  agreement  when  the  insurance  is  arranged. 

The  risk  of  explosions  may  also  be  included  in  the  policy,  but 
requires  a  special  agreement. 

Other  perils  or  risks  may  be  included  in  the  policy  by  special 
arrangement,  and  where  the  custom  or  usage  of  the  trade  re- 
quires, insurance  against  "all  risks"  may  be  had. 

The  Policy  Sfecipically'  Excludes:  (a)  War  risks  and  all 
consequence  of  hostilities  or  warlike  operations. 

(b)  Loss  or  damage  caused  by  strikers,  locked  out  workmen 
or  persons  taking  part  in  labor  disturbances  or  riots  or  civil 
commotions. 

These  risks  may  be  included  in  the  risks  insured  by  special 
agreement  and  the  payment  of  the  additional  premium  required 
therefor  by  the  insurer. 

The  Insurance  Is  Against:  Loss  oi-  damage  to  the  cargo 
insured.  General  Average  and  Salvage  charges  payable  by  the 
cargo  insured.    Sue  and  Labor  expenses. 

Policy  Exemptions  In  Respect  to  Claims:  The  policy  does 
not  insure  against  all  minor  damages  sustained  by  the  cargo 


648     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

caused  by  an  insured  peril.  The  insurer  is  not  liable  unless 
the  loss  or  damage  sustained  by  the  cargo  shall  equal  or  exceed 
the  policy  franchise,  viz:  the  damage  (based  upon  a  named 
percentage  of  the  value),  which  the  policy  provides  shall  occur 
as  a  minimum  damage  before  the  insurer  becomes  liable. 

This  policy  franchise  is  not  the  same  in  respect  to  all  classes 
of  commodities.  The  franchise  is  also  a  matter  of  negotiation 
when  the  insurance  is  arranged.  In  some  policies  the  franchise 
may  be  3%  on  each  package;  on  others,  3%  on  the  shipment; 
and  again  in  others  5% -10%  or  even  more  on  the  shipment  or 
package. 

If  the  cargo  be  insured  Free  of  Particular  Average  under  3% 
on  each  package  (in  insurance  parlance  F.  P.  A.  under  3%  on 
each  package)  and  any  package  insured  is  damaged  by  an  in- 
sured peril  to  the  extent  of  3%  or  more  of  its  sound  value,  the 
insurer  agrees  to  pay  the  same  percentage  of  the  insured  value 
of  the  package  damaged  as  the  damage  bears  to  the  sound  value 
of  the  package.  If,  however,  the  damage  be  less  than  3%  of  the 
value,  the  insurer  is  not  liable  under  the  policy. 

Marine  insurance  with  a  franchise  of  this  character  is  some- 
times referred  to  by  merchants  as  "With  Average" — "W.  A." 
The  particular  franchise  to  be  used  is  dependent  upon  the  prac- 
tice of  the  particular  trade  involved. 

Many  commodities  are  insured  under  what  is  known  as  the 
F.  P.  A.  Institute  Cargo  clauses,  usually  referred  to  by  mer- 
chants as  "F.  P.  A."  Under  these  clauses  partial  damage  to 
the  commodity  (partial  loss  as  distinguished  from  total  loss) 
is  not  payable  by  the  insurer,  unless  the  vessel  or  craft  carrying 
the  cargo  shall  have  stranded,  been  sunk  or  burnt  or  unless 
the  damage  sustained  by  the  cargo  insured  was  caused  by  fire 
or  collision  or  contact  of  the  vessel  carrying  it  Avith  some 
substance  other  than  water,  or  unless  the  damage  be  caused 
by  discharge  of  cargo  at  a  port  of  distress. 

The  rates  charged  for  insurance  with  this  franchise  are 
naturally  less  than  the  rates  charged  with  average. 

Another  clause  which  in  my  opinion  is  seriously  objection- 
able and  greatly  impairs  the  value  of  the  policy  is  found  in 
the  policies  issued  by  some  companies,  viz : 

"No  suit  or  action  for  the  recovery  of  any  claim  aris- 
ing under  this  policy  shall  be  maiiitainal)le  in  any 
Court,  unless  such  suit  or  action  shall  have  been  com- 
menced within  one  year  from  the  date  of  the  happening 
of  the  loss  out  of  which  the  said  claim  arose ;  Pro- 
vided, however,  that  if,  by  the  laws  of  the  State  within 
which  this  policy  is  issued,  such  limitation  is  invalid, 
then  any  such  claim  shall  be  void  unless  action  is  com- 
menced within  the  shortest  limit  of  time  permitted  by 
the  laws  of  such  State  to  be  fixed  herein." 


DELIVERY   OF   EXPORT  ORDERS  649 

This  clause  is  not  generally  used  but  does  appear  in  the 
policies  issued  by  a  few  companies. 

All  marine  insurance  is  based  upon  the  understanding  that 
the  cargo  insured  is  shipped  '  *  Under  Deck, ' '  and  if  cargo  is 
shipped  "On  Deck"  the  insurance  does  not  attach  and  cover 
unless  it  has  been  so  reported  to  the  insurer  and  his  agreement 
obtained. 

Open  or  Contract  Policies:  The  greater  part  of  marine 
insurance  on  cargo  in  the  United  States  is  transacted  under 
open  contracts,  or  what  is  more  commonly  known  here  as  Open 
Policies. 

These  Open  Policies  are  in  the  form  of  contracts  between 
the  assured  and  the  Insurance  Company  or  companies  under 
which  each,  as  a  consideration  of  the  contract,  assumes  certain 
named  obligations  to  the  other.  In  general  the  consideration 
given  by  the  assured  is  that  he  will  report  promptly  to  the 
insurer  for  insurance  all  shipments  in  which  he  has  an  insurable 
interest  coming  within  the  terms  of  the  contract  and  pay  pre- 
miums thereon.  The  consideration  given  by  the  insurer  is  that 
he  will  accept  insurance  on  all  shipments  in  which  the  assured 
has  an  insurable  interest  coming  within  the  terms  of  the 
contract  at  certain  rates  of  premiums  named  in  the  contract. 
The  obligations  are  mutual,  and  the  failure  of  the  assured  to 
promptly  report  all  his  shipments  for  insurance  and  pay  pre- 
miums thereon  will  relieve  the  insurer  from  liability.  The  con- 
tract is  largely  one  of  good  faith  and  clauses  in  regard  to  clerical 
errors  and  oversights,  safeguarding  the  interests  of  both  sides 
are  generally  included. 

The  advantages  of  such  contracts  to  the  assured  are  many. 
It  enables  him  to  secure  such  special  conditions  and  safeguards 
as  are  necessary  to  his  business,  and  fixes  the  terms  and 
]-ates  for  his  insurance  without  the  necessity  of  large  detail  in 
negotiating  each  transaction.  It  provides  a  regular  channel  for 
his  insurance,  and  in  the  event  of  claim  secures  for  him  a  more 
personal  interest  in  his  affairs.  For  the  insurance  company 
it  secures  a  regular  flow  of  premium,  which  is  an  advantage. 
For  both  it  cuts  down  the  detail  and  cost  of  operation. 

General  Considerations  Covering  Claims  Under  Policies 
OF  Marine  Insurance  :  As  marine  insurance  protects  only 
against  loss  or  damage  to  the  insured  cargo  caused  by  those  cer- 
tain named  perils  or  risks  assumed  by  the  insurer  and  named 
in  the  policy,  to  establish  a  claim  under  the  insurance  the 
assured  must  show : 

1.  That  the  loss  was  caused  by  a  peril  insured. 

2.  That  the  loss  happened  during  the  period  insured. 


650     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

3.  To  what  extent  the  goods  were  damaged;  and 

4.  That  the  amount  claimed  correctly  represents  the  liability 
of  the  insurer  under  the  terms  of  the  insurance  contract. 

Such  proof,  usually  in  the  nature  of  formal  documents,  is 
always  required  by  the  insurers  before  payment  is  made. 

Notice  op  Loss  to  Insitrer:  Marine  insurance  policies  usu- 
ally provide  that  in  the  event  of  damage  to  the  cargo  insured 
for  which  claim  will  be  made,  notice  must  be  given  the  insurers 
or  their  representative  immediately  the  damage  is  known  and 
prior  to  survey,  so  that  the  insurer  may  appoint  their  own  sur- 
veyors to  act  for  them  and  examine  the  damage.  The  condition 
of  the  cargo  should  be  ascertained  as  soon  as  possible  following 
its  discharge  from  the  vessel  and,  if  damage  is  found,  the  in- 
surers, or  their  representative,  immediately  notified. 

American  policies  usually  require  notice  be  given  the  Agent 
of  the  Company,  if  there  be  one  at  the  place  the  loss  occurs,  or, 
in  the  absence  of  such  an  Agent,  to  the  Correspondent  of  the 
National  Board  of  Marine  Underwriters. 

English  policies  usually  require  notice  be  given  to  the  Agent 
of  the  Company,  if  there  be  one  at  the  place  the  loss  occurs,  or, 
in  the  absence  of  such  an  Agent,  to  Lloyd 's  Agent. 

Insurance  companies  of  other  countries  usually  have  their 
own  appointed  agents. 

The  policies  should  be  carefully  examined  and  their  condi- 
tions strictly  observed.  The  policies  often  show  the  name  of  the 
Agent  to  whom  notice  of  loss  should  be  given.  Even  though  the 
policies  may  not  definitely  provide  for  it  being  done,  prompt 
notification  to  Insurers,  or  their  Agents,  of  any  damage  will 
usually  facilitate  the  determination  and  collection  of  the  loss. 
If  there  be  no  Agent  of  the  interested  Company  or  of  the  New 
York  Board  of  Marine  Underwriters  where  the  loss  occurs, 
Lloyd's  Agent  (if  there  be  one)  should  be  asked  to  act  for  the 
insurers. 

TJnderw^riters'  Agents — Lloyd's  Agents:  At  most  of  the 
large  and  important  seaports  are  Agents  appointed  by  the  In- 
surance Companies  to  act  for  them  where  losses  occur  in  which 
they  are  interested.  These  Agents  are  authorized  to  appoint 
surveyors  or  other  experts  to  act  for  the  insurers  in  the  determi- 
nation of  the  nature,  cause,  and  extent  of  damage.  The  reports 
of  surveys  should  be  authenticated  l)y  the  Underwriter's  Agent, 
who  should  also  certify  as  to  expenditui'es  made  in  connection 
with  the  loss  and  the  reasonableness  of  same. 

1.  The  nature  of  the  damage  and  the  surveyors'  opinion  as  to 
the  cause  of  same. 


DELIVERY  OF  EXPORT  ORDERS  651 

2.  The  extent  of  the  damage,  if  this  can  be  determined.     If  the 

surve,yors  and  consignees  are  unable  to  agree  upon  the  de- 
preciation, the  owner  may  sell  the  damaged  goods  at  public 
auction. 

(Where  it  is  impossible  for  the  parties  to  agree  upon 
the  extent  of  the  damage,  it  is  the  general  rule  to  have  this 
determined  by  a  sale  of  the  damaged  goods  at  public  auc- 
tion. This  general  rule,  however,  cannot  properly  be  ap- 
plied where  the  goods  damaged  are  of  such  a  character  as 
not  to  have  a  marketable  value  when  sound.  Where  goods 
are  intended  for  a  special  purpose  and  have  no  appreciable 
value  except  for  that  purpose  the  rule  is  entirely  worthless 
as  a  guide  in  determining  the  actual  damage.  In  such  cases 
some  other  and  more  reasonable  course  should  be  followed, 
the  cardinal  principle  being  to  handle  the  damaged  goods 
as  would  have  been  done  had  there  been  no  insurance.) 

3.  The  gross  sound  market  value  of  the  goods  at  the  port  of 

destination,  and  whether  such  value  was  on  the  basis  of 
' ' cash "  or  "on  time " ;  if  the  latter,  the  term  of  credit  and 
the  discount  for  cash. 

If  the  merchandise  is  of  a  character  customarily  sold  at  the 
port  on  the  basis  of  ' '  duty  paid, ' '  the  gross  market  value  should 
be  shown  on  a  "duty  paid"  basis;  but  if  it  is  of  a  character 
ordinarily  sold  "In  Bond,"  and  the  damaged  cargo  has  been 
sold  "In  Bond,"  the  values  given  should  be  the  "In  Bond" 
values. 

4.  Any  extra  expenses  incurred  in  handling  and  disposing  of 

the  damaged  goods,  including  expenses  of  handling  for 
survey  and  the  survey  fees.  Any  credits  on  account  of  re- 
bate of  duty  should  likewise  be  shown. 

Damage  By  Water  Poured  On  in  the  Effort  To  Extin- 
guish A  Fire  On  Ships:  Damage  done  by  water  (the  term  "wa- 
ter" in  this  connection  includes  steam,  chemicals  or  any  other 
material)  voluntarily  used  in  an  effort  to  extinguish  fire  on 
shipboard  is  a  general  average  damage.  The  entire  damage  to 
any  package  which  has  actually  been  on  fire,  however,  is  treated 
as  particular  average.  In  case  of  a  package  damaged  by 
"smoke  and  water,"  the  damage  by  smoke  is  particular  aver- 
age, while  the  damage  by  water  is  general  average. 

In  all  cases  of  fire  damage,  it  is  necessary  for  the  survey 
reports  and  accounts  sales  of  damaged  cargo  to  show  an  accu- 
rate segregation  into  the  following  causes  of  damage : 

First :  Any  package  touched  by  ' '  fire  and  water ' ' 
should  be  designated  as  "fire  and  water  dam- 
aged. ' ' 


652     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Second  :  Any  package  damaged  by  ' ' smoke ' '  alone 
should  be  designated  "smoke  damaged." 

Third :  Any  package  damaged  by  ' '  water ' '  should  be 
designated  "water  damaged." 

Fourth  :  Any  package  damaged  by  ' '  smoke  and  water ' ' 
should  be  designated  as  "smoke  and  water  dam- 
aged," and  in  such  class  of  damage,  the  dam- 
age iDy  smoke  and  the  damage  by  water  should 
be  separately  shown. 

All  items  of  expense  and  all  credits  for  rebates  or  duty  or 
similar  items  as  mentioned  above,  should  also  be  shown  properly 
segregated  as  between  the  several  classes  of  damage. 

The  preparation  of  claims  and  the  collection  of  losses  from 
insurers  are  greatly  facilitated  where  there  has  been  an  obser- 
vance of  the  foregoing  suggestions  and  the  following  complete 
proofs  of  loss  required  promptly  furnished. 

In  Cases  of  Total  Loss  of  Vessel  and  Cargo  :  1.  Extended 
protest  or  a  notarial  certified  copy  of  same. 

2.  Original  invoices  covering  the  goods  shipped  and  lost. 

3.  All  the  negotiable  bills-of-lading  under  which  the  goods 
were  shipped.  If  the  cargo  was  consigned  to  a  named  consignee, 
the  original  set  of  bills-of-lading  must  be  endorsed  in  blank  by 
such  consignee. 

4.  A  letter  from  the  Agents  of  the  vessel  at  loading  port 
certifying  that  the  entire  shipment  as  described  in  the  Bs/L  was 
actually  on  board  the  vessel  at  the  time  of  sailing. 

5.  The  original  and  duplicate  Certificates  of  Insurance  (if  is- 
sued) endorsed  in  blank  by  the  payee. 

In  Case  of  Particular  Average  (Damage  by  Depreciation) 
Cargo  Arrived  in  Damaged  Condition : 

1.  Extended  protest  or  a  notarial  certified  copy  of  same  or  a 
verbatim  abstract  of  the  vessel's  log  book  (properly  certified) 
showing  the  circumstances  and  the  cause  of  the  damage. 

2.  Original  invoices  covering  the  entire  shipment  or  a  certi- 
fied copy  of  same. 

3.  One  set  of  the  Bs/L  covering  the  shipment. 

4.  The  Report  of  Survey  on  the  damaged  cargo,  authenticated 
by  an  Underwriter's  Agent. 

Care  should  be  used  to  see  that  the  survey  report  covers 
all  the  matters  hereinbefoi'e  mentioned  as  necessary  to  be 
included  therein.  Incomplete  survey  reports  frequently 
create  difficulties  and  long  delays  in  settlement. 

Statements  from  carriers,  or  their  agents,  certifying  to 
the  cargo  being  damaged  or  the  nature  of  the  damage  are 
not  accepted  by  insurers  as  proper  proofs. 


DELIVERY  OF   EXPORT   ORDERS  653 

5.  The  original  auction  sales  of  any  cargo  sold  at  auction, 
authenticated  by  an  Underwriter's  agent. 

6.  The  original  and  duplicate  Certificates  of  Insurance  (if 
issued)  endorsed  by  payee. 

In  Case  of  Partial  Loss  (Total  Loss  of  a  Part  of  Shipment)  : 

1.  Extended  protest  or  a  notarial  certified  copy  of  same  or  a 
verbatim  abstract  of  the  vessel's  log  book  (properly  certified) 
showing  the  circumstances  and  the  cause  of  the  damage. 

2.  Original  invoices  covering  the  entire  shipment  or  a  certi- 
fied copy  thereof. 

3.  One  set  of  the  Bs/L  (originals  preferred)  covering  entire 
shipment.  If  the  cargo  was  consigned  to  a  named  consignee,  the 
Bs/L  endorsed  in  blank  by  the  consignee. 

4.  A — In  the  event  the  master  or  officers  of  the  vessel  can  state 
of  their  own  knowledge  exactly  what  cargo  was  totally  lost  or 
destroj'ed :  an  affidavit  from  the  master  or  officers  of  the  vessel 
as  to  the  cargo  totally  lost  or  destroyed :  or 

B — In  the  event  loss  was  caused  by  an  accident  or  disaster 
W'hich  from  its  nature  would  prevent  the  master  or  officers  from 
knowing  exactly  wiiat  cargo  was  destroyed :  a  certificate  from 
the  delivering  carrier  showing  the  cargo  landed  from  the  vessel, 
and,  a  certificate  from  the  carrier  at  point  of  shipment  showing 
the  cargo  loaded  in  the  vessel :  or 

C — If  the  cargo  was  discharged  in  worthless  condition  and 
was  condemned  by  the  survej'ors,  a  copy  of  the  Survey  Report 
on  such  cargo  properly  authenticated  by  the  Agent  of  the 
Underwriter. 

5.  Original  and  duplicate  Certificates  of  Insurance  (if  issued) 
properly  endorsed  by  payee. 

Important — Precaution  :  In  the  event  of  loss  or  damage  to 
the  cargo  w:here  the  carrier  cannot  show  clearly  that  the  loss 
was  directly  caused  by  perils  of  the  seas,  fire,  stranding,  or 
collision,  a  claim  for  the  loss  should  be  immediately  filed  against 
the  carrier  who  last  had  possession  of  the  goods.  This  in  order 
to  preserve  the  rights  of  the  owner  and/or  the  Insurance  Com- 
pany in  the  event  the  loss  is  subsequently  found  to  be  due  to 
causes  for  which  the  carrier  is  responsible.  The  Bs/L  usually 
require  such  notice  to  be  given  within  a  specified  time  after 
delivery  is  made. 

Theft  and  Pilferage  Losses:  As  already  stated,  ordinary 
forms  of  marine  insurance  policies  do  not  cover  losses  arising 
from  theft  or  pilferage.  It  is  only  where  theft  and  pilferage  is 
specially  covered  by  the  policy  (for  which  an  additional  premium 
must  be  paid)   that  underwriters  are  liable  for  such  losses. 

In  all  losses  of  this  character  it  is  necessary  that  claim  for  the 
loss  be  immediately  made  against  the  carrier  who  last  had  pos- 


654     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

session  of  the  goods.  This  in  order  to  preserve  the  rights  of  the 
owner  and/or  the  insnrance  company,  in  the  event  the  carrier  is 
liable  for  the  loss.  The  bills-of -lading  usually  require  such  notice 
to  be  given  within  a  specified  time  after  delivery  is  made. 

The  character  of  claims  for  loss  by  theft  or  pilferage  necessi- 
tates proof  that  the  articles  claimed  as  lost  were  shipped  and 
that  they  were  not  received  by  the  consignee  and  that  they  were 
stolen.  The  following  formal  documents  are  invariably  required : 

Claims  for  Theft  of  Entire  Package: 

1.  Affidavit  from  the  person  who  packed  the  case  or  package 
lost,  certifying  as  to  the  contents  of  the  package  when  shipped. 

2.  Copy  of  bills-of-lading  showing  shipment. 
3;  Copy  of  Shipper's  invoice. 

4.  Affidavit  from  consignee  that  package  has  not  been  re- 
ceived. 

5.  Copy  of  the  claim  made  against  the  carrier  and  all  corre- 
spondence in  connection  therewith,  including  correspondence 
showing  the  efi'orts  made  to  locate  the  missing  package. 

6.  The  original  and  duplicate  certificates  of  insurance  (if 
issued). 

Claims  for  Pilferage  : 

1.  Affidavit  from  person  packing  the  case  or  package  pilfered, 
certifying  as  to  the  contents  of  the  i)ackage  when  shipped. 

2.  Copy  of  bills-of-lading  showing  shipment. 

3.  Copy  of  Shipper's  invoice. 

4.  A  certificate  either  from  an  agent  of  the  insurance  company 
or  a  correspondent  of  the  National  Board  of  Marine  Under- 
writers, or  Lloyd's  agent,  or  a  Custom  Llouse  certificate,  show- 
ing the  condition  of  the  package  when  delivered  and  its  contents 
when  delivered. 

5.  Original  and  duplicate  certificate  of  insurance  (if  issued). 

6.  A  copy  of  the  claim  made  against  the  carrier,  with  par- 
ticulars of  where  and  when  the  claim  was  filed. 

Claims  Under  Insurance  by  Registered  Mail  or  Registered 
Parcel  Post  : 

1.  Postal  receipt  issued  at  point   of  sliipment. 

2.  Postal  certificate  at  point,  of  destination  certifying  to  con- 
dition of  package  and  shortage  and/or  condition  of  contents 
or  non-delivery  of  package. 

3.  Affidavit  of  person  packing  ease  oi-  package  as  to  contents 
of  case  or  package  when  sliipped. 

4.  Original  invoices  oi'  certified   coi)ies  thereof. 

5.  Affidavit  of  consignee  as  to  non-delivery — shortage  of 
contents — or  damage  to  contents. 


DELIVERY  OF  EXPORT  ORDERS  655 

6.  In  event  of  claim  of  considerable  value  for  damage  to  con- 
tents, a  report  of  survey  authenticated  by  Underwriter's  agents 
may  be  necessary. 

General  Average  Deposits:  In  cases  where  cash  deposits 
are  required  by  the  agents  of  the  vessel  to  cover  General  Average 
contribution  and/or  Salvage  charges,  refund  of  such  deposits 
customarily  will  be  made  by  the  insurers  on  surrender  of  the 
original  deposit  receipt  endorsed  in  blank  by  the  party  whose 
name  appears  thereon  as  depositor. 

The  collection  of  such  refunds  will  be  facilitated  if  informa- 
tion as  to  the  date  and  nature  of  the  accident  and  the  name 
of  the  average  adjuster  is  furnished. 

Claims  tor  General  Average  Contribution  :  Where  the 
adjustment  of  general  average  is  prepared  in  this  country,  col- 
lection of  the  contribution  of  the  cargo  is  generally  made  by 
the  collecting  agent  directly  from  the  insurance  companies. 

Where  the  adjustment  is  prepared  abroad  and  cash  deposits 
have  been  taken  against  the  cargo's  contribution,  payment  is 
made  out  of  the  cash  deposit. 

In  those  cases  of  foreign  adjustments  where  payment  of 
general  average  contribution  is  demanded  after  the  adjustment 
is  completed  it  is  always  preferable  to  submit  the  claim  to  the 
insurers  for  their  approval  before  payment.  In  all  claims  of  this 
character  (irrespective  of  whether  payment  has  been  made  by 
the  assured)  a  copy  of  the  adjustment  or  a  certificate  of  general 
average  from  the  adjusters,  accompanied  by  the  certificate  of 
insurance,  should  accompany  any  claim  for  refund  by  the 
Underwriters. 


CHAPTER  XII 


CONTROL   OF   EXPORT   SALES   AND 
GENERAL  PROBLEMS 

CONTROL  OF  EXPORT  SALES 

THE  export  section  of  an  enterprise,  in  common 
with  every  other  phase  of  business  operations, 
requires  not  only  careful  planning  but  also  careful 
control  to  see  that  the  plans  formulated  are  carried  out 
efficiently,  to  see  that  the  means  of  selling  decided  upon 
are  operated  successfully  in  securing  the  results  one 
has  reason  to  expect.  Careful  control  is  necessary 
in  order  that  the  export  organization  may  operate 
smoothly  and  with  a  minimum  of  waste  in  accomplish- 
ment of  the  purposes  for  which  it  has  been  constructed. 
The  export  executive  must  rely  upon  his  accounts  and 
records,  upon  written  and  verbal  reports  of  subordinates 
and  field  force,  and  upon  the  proper  analysis  and  pre- 
sentation of  these  for  control.  From  his  point  of  view  a 
satisfactory  control  system  is  one  which  depends  upon 
his  general  philosophy  of  control,  whether  it  is  his  belief 
and  the  policy  of  his  organization  to  require  the  detailed 
control  of  all  operations  or  to  require  accountability  only 
in  the  form  of  results.  In  sales  operations  this  view- 
point frequently  takes  the  form  of  a  statement  that  the 
only  records  worth  while  are  orders  and  records  of  sale. 
In  the  development  of  a  foreign  market  according  to  a 
well-thought-out  plan,  no  transaction  is  complete  in  itself 
but  each  is  a  part  of  the  fulfilment  of  the  general  plan. 
Furthermore,  every  transaction  is  in  a  sense  the  basis 
of  future  transactions.  Data  must  be  collected  and  infor- 
mation must  be  at  hand  to  prevent  recurrence  of  mis- 

656 


EXPORT  SALES  CONTROL  657 

takes  and  to  enable  the  positive  action  of  building  up 
good-mil  for  the  firm.  It  is  unnecessary  to  go  into  the 
accounting  phases  of  sales  control.  From  the  accounts 
it  is  evident  that  the  export  manager  may  secure  sales 
in  other  countries  by  customers  and  on  other  bases. 
From  the  accounts  and  orders  he  may  by  proper  handling 
secure  data  as  to  the  relations  and  value  of  particular 
customers,  as  well  as  of  particular  agencies  and  particu- 
lar field  agents.  The  difficulty  in  many  cases  is  not  that 
of  obtaining  such  information,  but  the  difficulty  of  han- 
dling it  in  such  a  way  as  to  secure  summarized  figures 
which  can  be  grasped  without  prohibitive  expense.  In 
addition  to  the  account  records  the  sales  manager  will 
have  records  relating  to  salesmen,  customers,  prospec- 
tive buyers,  advertising,  orders,  deliveries  and  ship- 
ments, as  well  as  records  relating  to  the  export  personnel. 
The  sources  of  these  records  are  fairly  obvious.  Some 
of  them  are  derived  from  internal  records  of  the  various 
departments  of  the  business  enterprise.  Some  of  them, 
particularly  the  records  relating  to  prospective  custom- 
ers, are  the  results  of  work  of  the  research  department. 
Much  of  the  valuable  information  upon  customers  and 
upon  the  market,  which  can  be  used  as  a  basis  for- con- 
trol purposes,  is  the  result  of  reports  of  salesmen,  agents, 
representatives,  and  branch  offices  in  the  foreign  field. 
In  the  planning  of  control  reports  for  salesmen  and 
branch  offices,  the  same  cautions  must  be  observed  as  in 
dealing  with  domestic  salesmen  and  domestic  branches'. 
The  sales  manager  should  first  of  all  determine  the  infor- 
mation which  is  absolutely  essential  for  the  conduct  of 
his  work,  then  make  it  as  easy  as  possible  for  the  subor- 
dinate in  the  field  to  furnish  that  information.  While 
the  methods  of  selling  in  some  foreign  markets  allow 
the  foreign  salesman  much  more  time  than  the  domestic 
salesman  has  for  writing  and  for  making  out  reports, 
yet  it  is  not  at  all  desirable  to  overburden  him  with 
voluminous  reports. 


G58     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

A.  Necessity  of  Control. 

What  are  the  requisites  of  a  satisfactory  system  of  control 
of  export  sales  operations? 

Is  there  necessity  for  a  system  of  control  outside  of  that 
furnished  by  accounting  systems? 

B.  Methods  of  Control. 

What  reports  and  records  can  be  used  for  the  control  of 
export  sales? 

Should  the  control  of  export  sales  operations  be  the  func- 
tion of  any  single  official  or  not? 

In  what  way  can  graphic  methods  be  used  in  export  sales 
control? 

What  should  be  the  nature  of  reports  of  export  salesmen, 
foreign  agents  and  representatives? 

What  reports  should  the  export  sales  executive  prepare  for 
administrative  officers  ? 

What  type  of  reports  should  be  secured  from  agencies  out- 
side the  business? 

What  are  the  sources  of  the  following  records  and  how 
should  they  be  used  in  controlling  sales:  (1)  Records  re- 
lating to  foreign  customers;  (2)  Records  of  foreign  pros- 
pects; (3)  Sales  classified  according  to  products,  territories, 
classes  of  buyers,  etc.;  (4)  Records  relating  to  the  per- 
formance of  export  salesmen  and  other  members  of  the 
export  force,  giving  sales  according  to  individuals,  districts, 
lines,  etc.;  (5)  Records  dealing  with  advertising,  showing 
returns  from  foreign  advertising,  expenditures,  etc.;  (6) 
Records  of  foreign  orders,  deliveries,  and  shipments;  (7) 
Statements  of  budget  estimates  as  to  export  sales,  produc- 
tion, stocks,  etc.;  (8)  Records  of  export  personnel,  such  as 
application  blanks,  interview  blanks,  letters,  ratings,  and 
individual  performance  data? 

C.  Selling  Costs. 

What  items  should  properly  enter  into  export  selling  cost? 

How  can  standards  for  various  items  of  export  selling  cost 
be  determined? 


EXPORT  SALES  CONTROL  659 

Problem  155 
Harmonia  Gramophone  Company — Control  of  Sales* 

*'How  can  better  control  of  foreign  sales  be  secured?" 
is  the  question  before  the  export  manager  of  the  Har- 
monia Gramophone  Company. 

The  company  has  one  salesman  in  England,  another 
with  headquarters  in  France  who  covers  the  Continent, 
one  in  Australia,  one  in  the  West  Indies,  another  in 
Mexico,  and  two  in  South  America,  all  of  whom  are  paid 
on  a  salary  basis  with  a  small  commission  on  each  sale. 
The  export  manager  follows  the  usual  practice  of  writ- 
ing encouraging  letters  regularly  to  each  salesman  con- 
gratulating him  on  his  orders,  if  successful,  or  telling 
him  that  the  company  is  behind  him  and  appreciates  the 
diflBculties  he  has  to  encounter  in  case  he  is  not  securing 
as  many  sales  as  had  been  expected.  When  the  salesman 
reports  that  competitors  are  getting  most  of  the  business 
the  export  manager  compares  the  present  sales  with  past 
records,  and  if  the  proportion  of  increase  is  not  being 
maintained  he  tries  to  bolster  up  the  salesmen  with  addi- 
tional advertising  and  circularization  of  his  district.  Of 
course,  a  list  of  dealers  is  secured  on  which  the  sales- 
man's itinerary  is  planned;  but  since  frequently  the  mer- 
chants are  German  or  English  immigrants  or  natives 
with  a  preference  for  European  houses,  it  is  diflBcult  to 
tell  what  proportion  are  good  prospects.  A  file  is  kept 
of  all  customers  who  are  regularly  sent  the  latest  circu- 
lars. A  similar  file  is  kept  of  inquirers  asking  for  cata- 
logs, prices,  and  like  information ;  this  group  is  also  sent 

*Upon  the  control  of  foreign  sales  practically  nothing  has  been  writ- 
ten; however,  an  article  entitled  "Control  of  Export  Sales"  in  the  Feb. 
1921  edition  of  The  World's  Marlcets  and  one  entitled  "Export  History 
Eecord  Cards"  in  the  Nov.  13,  1920  issue  of  Export  Trade  and  Export- 
ers' Review  may  be  of  interest.  Among  the  general  sources  of  informa- 
tion upon  sales  control  may  be  mentioned  some  relating  to  domestic  sales 
management : 

Dartnell  Corporation,  Chicago — A  Special  Report  on  the  Use  of  Graphic 
Charts  in  Sales  Department  JVork;  also  Suggestive  Sales  Record  and  Or- 
der Systen^  as  Used  hy  Representative  Concerns  in  Varied  Lines  of  Busi- 
ness. See  also  M.  T.  Copeland,  Business  Statistics;  Brinton,  Graphic 
Methods  of  Presenting  Facts. 


660     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

follow-up  letters,  although  the  real  value  of  this  file  is 
questionable  inasmuch  as  most  inquirers  appear  to  be 
catalog  collectors  or  people  whose  curiosity  has  been 
aroused  through  an  advertisement  rather  than  prospec- 
tive customers.  On  the  whole,  this  system  has  not  pro- 
duced the  results  that  were  expected  and  the  foreign 
department  is  showing  only  a  nominal  profit. 

The  export  manager  has  learned  that  the  following 
system  is  being  used  by  a  rival  company,  but  inasmuch 
as  this  firm  has  but  recently  entered  the  foreign  field 
and  has  never  been  considered  a  serious  competitor  of 
the  Harmonia  Company,  he  is  not  at  all  sure  that  it  will 
prove  practicable  for  his  own  company. 

The  foreign  markets  are  split  up  into  three  divisions: 
good  territory  which  warrants  immediate  development 
by  the  company;  prospective  territory  which  it  would 
be  desirable  to  develop  in  the  future ;  and  poor  territory 
from  the  development  of  which  the  company  would  not 
receive  profitable  returns.  This  classification  is  deter- 
mined from  the  Department  of  Commerce  figures  and 
from  the  company's  own  records  and  experience  in  the 
foreign  field.  Efforts  are  concentraled  upon  the  more 
profitable  territory  at  once,  but  secondary  markets  are 
developed  whenever  such  development  can  be  made  in 
conjunction  with  the  primary  markets  and  without  inter- 
fering with  the  intensive  cultivation  of  the  more  prof- 
itable districts.  The  districts  from  which  returns  are 
negligible  may  be  visited  by  a  salesman  if  his  route 
passes  through  this  section,  but  no  direct  effort  is  ex- 
pended, since  the  returns  are  not  commensurate  with 
the  money  that  it  would  l)e  necessary  to  spend  in  order 
to  get  the  business. 

The  manager  goes  oNcr  each  Ici-i-ilory  willi  liis  sales- 
men and  deterniiiics  llic  nnioiiiil  of  business  which  can 
be  exi)ect('(l  I'l-oni  eacli  district,  lie  seeks  to  establish  a 
quota  that  can  ])e  reached  by  the  sah'snian  if  he  i)iits  foi'th 
reasonable  effort.  Usually  llie  salesman  is  paid  a  bonus, 
in  addition  to  his  usual  salary  and  commissicm  on  sales, 
if  he  secures  above  80%  of  the  established  quota.     In 


EXPORT  SALES  CONTROL  661 

case  the  salesman  is  unable  to  reach  the  standard  set 
the  quota  is  changed  if  conditions  warrant  this  step,  or 
else  the  salesman  must  give  place  to  a  more  efficient 
man.  By  establishing  a  quota  both  the  export  manager 
and  his  salesman  have  a  definite  goal  toward  which  to 
work,  and  a  ''yardstick"  is  available  to  measure  each 
man's  efficiency. 

A  report  book  is  issued  to  each  salesman  containing 
blanks  for  the  name  of  each  customer,  his  address,  'phone 
and  cable  address  if  he  has  one,  and  general  information 
as  to  the  size  of  his  establishment.  On  the  back  of  this 
blank  the  salesman  records  the  date  of  his  visit,  whether 
or  not  an  order  was  secured,  the  probability  of  securing 
future  business,  and  any  other  remarks.  From  these  re- 
ports are  made  up  three  lists  of  foreign  merchants ;  those 
who  are  customers  of  the  company,  those  whom  it  would 
be  desirable  to  secure  as  customers,  and  undesirable 
dealers  with  whom  the  company  does  not  care  to  do 
business. 

The  itinerary  of  the  salesman  is  carefully  planned  in 
advance  and  all  cables  and  letters  are  sent  him  in  care 
of  the  nearest  American  consul.  Each  letter  sent  by  the 
company  and  all  replies  sent  by  the  salesman  are  serially 
numbered  in  order  to  check  up  on  any  possible  loss  of 
important  documents.  A  duplicate  of  each  letter  is  usually 
mailed  several  days  later  in  order  to  insure  against  loss 
of  the  original.  Each  letter  treats  of  only  one  subject 
to  be  sure  that  it  receives  prompt  attention,  and  that  a 
reply  is  not  unnecessarily  delayed  by  passing  the  letter 
through  the  hands  of  several  executives  to  answer  vari- 
ous qustions.  Cables  are  also  numbered  consecutively 
and  confirmations  are  always  sent  by  mail  to  avoid  any 
misunderstandings  through  garbled  cablegrams. 

Lists  of  dealers  in  each  foreign  country  which  are  fur- 
nished by  Dun,  Bradstreet,  and  other  commercial  agen- 
cies, are  compared  with  the  company's  list  of  customers 
and  desirable  prospects  in  order  to  determine  whether  or 
not  the  company  is  securing  its  portion  of  the  business. 


662     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Reports  from  the  Department  of  Commerce  are  also  used 
in  this  connection.  With  this  information  available  the 
export  manager  operates  on  the  "exception  principle." 
If  a  territory  is  producing  the  desired  results,  there  is 
no  need  for  the  export  manager  to  exercise  supervision 
except  by  writing  the  salesman  that  the  company  ap- 
preciates his  work  and  has  an  interest  in  his  welfare. 
When  a  weak  spot  develops,  however,  the  export  man- 
ager directs  his  efforts  to  building  up  the  sales  in  this 
district.  Conditions  affecting  the  company's  sales  are 
carefully  studied ;  if  the  situation  warrants  it,  additional 
advertising  is  used  and  all  dealers  are  circularized  with 
specially  prepared  material.  Merchants  listed  as  desir- 
able prospects  may  be  sent  personal  letters  by  the  ex- 
port manager,  and  all  possible  assistance  is  rendered 
the  salesman. 


Problem  156 

The  Mott  Company — Branch  Managers'  Reports 

The  Mott  Company  exports  book  paper  and  printing 
equipment  principally  to  Latin  America,  where  it  oper- 
ates branches  in  the  important  countries.  Its  salesmen, 
who  call  on  the  leading  stationery  dealers  and  publishing 
houses  in  their  territories,  make  out  a  progress  report 
each  week,  a  copy  of  which  is  forwarded  to  the  New  York 
office.  This  report  gives  the  name  and  address  of  each 
firm  on  which  the  salesmen  call,  whether  or  not  an  order 
was  secured,  remarks  as  to  the  possibility  of  securing 
future  business  from  this  source,  and  general  informa- 
tion as  to  the  conditions  of  business  in  that  locality.  Ad- 
ditional information  on  business  conditions  and  the  ac- 
tivities of  the  salesmen  is  frequently  given  in  the  weekly 
letter  of  the  branch  manager  and  in  his  quarterly  reports 
on  the  amount  of  business  done  and  the  amount  of  stock 
on  hand  in  his  branch. 


EXPORT  SALES  CONTROL  663 

Recently  the  assistant  export  manager  attended  a 
round-table  discussion  where  he  learned  that  a  firm  ex- 
porting electrical  equipment  to  South  America  required 
extensive  reports  from  its  salesmen  and  branch  managers 
on  conditions  and  prospects  for  future  business  in  their 
territory.  This  company  planned  its  future  expansion 
in  each  field  mainly  on  these  reports.  For  example,  a 
report  was  received  from  the  liranch  manager  at  Tampico 
that  salt  water  was  entering  the  oil  field  and  flooding 
many  of  the  wells,  thus  destroying  their  value.  It  was 
rumored  that  this  salt  water  report  was  being  circulated 
by  the  oil  companies  in  the  Tampico  district  in  order  to 
discourage  the  Mexican  Government  from  increasing  the 
taxation  on  oil  property.  This  firm  was  about  to  expand 
its  Tampico  branch  but  after  weighing  the  facts  it  de- 
cided that  it  would  take  no  unnecessary  risks.  Instead 
it  decided  to  devote  its  eiforts  to  increasing  the  sales 
organization  in  Mexico  City,  and  consequently  began  the 
reduction  of  its  Tampico  organization.  Much  of  the  com- 
pany's  success  in  the  foreign  field  has  been  attributed  to 
the  reports  received  from  its  branch  managers  as  to 
local  conditions  abroad,  which  enabled  it  to  take  advan- 
tage of  a  situation  before  its  competitors  had  become 
aware  of  the  change  in  conditions. 

The  assistant  export  manager  of  the  Mott  Company 
advised  his  chief  to  adopt  the  practice  of  requiring  all 
branch  managers  to  make  extensive  reports  on  conditions 
in  their  territory,  but  the  latter  refused,  saying  ''The 
branch  managers  are  busy  enough  as  it  is  without  taking 
on  this  additional  work.  Besides,  what  is  the  use  of 
having  the  branch  manager  going  to  the  work  of  making 
a  report  when  all  this  information  is  collected  by  our 
Government?  We  pay  heavy  enough  taxes  to  support 
the  Government;  now  let's  see  if  we  can  get  a  little  good 
out  of  it.  The  branch  managers  are  primarily  salesmen ; 
that  is  the  reason  they  are  in  the  foreign  field.  Reports 
from  such  men  would  be  colored  accordingly  and  would 
not  be  a  reliable  basis  upon  which  to  form  a  conclusion." 


664>     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

The  assistant  export  manager  volunteered  the  infor- 
mation that  in  his  opinion  the  data  in  government  re- 
ports was  so  out  of  date  when  it  was  finally  published 
that  the  company  would  lose  valuable  time  by  relying 
upon  information  received  from  government  sources. 
The  manager  of  the  foreign  department  said  that  this 
information  might  be  late,  but  that  at  least  it  was  ac- 
curate and  that  it  was  far  better  to  rely  on  sound  facts 
than  to  "go  off  half-cocked"  because  of  some  branch 
manager 's  pet  rumor.  He  said  that  he  agreed  that  branch 
managers  should  give  more  information  in  their  reports 
than  they  were  giving  at  that  time  but  suggested  that 
although  it  was  all  right  to  have  a  branch  manager  report 
on  the  amount  of  stock  on  hand,  the  immber  of  new  cus- 
tomers, and  the  amount  of  profit  made,  to  have  him 
report  on  something  he  knew  nothing  about  was  abso- 
lutely useless. 

What  information  should  be  included  in  the  reports  of 
the  foreign  branch  managers  of  the  Mott  Company! 

Should  this  information  be  reported  on  a  standard  form 
or  only  by  letter? 


Problem  157 

HoLDEN  Tool  Company — Perpetual  Inventory  System 

The  Holden  Tool  Company  has  approximately  $3,200,- 
000  worth  of  machine  tools,  builders'  hardware,  and  con- 
struction tools,  stored  in  its  branch  warehouses  in 
London,  Paris,  Antwerp,  Buenos  Aires,  and  Tokio.  In 
1919  this  inventory  ran  as  high  as  $5,100,000,  but  the 
company  suffered  heavy  losses  l)ecause  of  depreciation 
and  carrying  charges  on  materials  for  which  there  was 
no  immediate  sale,  in  order  to  minimize  the  risk  of 
depreciation  and  at  liie  same  time  i'(>duce  operating  ex- 
penses abroad,  tlie  c()mi);niy  considers  it  advisable  to 
make  a  further  reduction  in  its  inventory.  For  this  pur- 
pose a  perpetual  inventory  system  with  minimum  limits  is 
contemplated.  This  system  would  be  operated  from 
the  home  office. 


EXPORT  SALES  CONTROL  665 

The  Holden  Tool  Company  was  originally  organized 
to  carry  on  construction  work  in  the  United  States  and 
abroad  and  incidentally  to  sell  construction  machinery. 
As  the  company  expanded  its  sales,  it  became  evident 
that  there  was  a  need  for  a  separate  organization  to 
handle  the  sale  of  construction  tools  and  builders'  hard- 
ware in  order  to  leave  the  engineering  force  free  to  con- 
centrate on  construction  work,  the  submitting  of  bids 
and  the  handling  of  building  contracts.  Later,  machine 
tools  w^ere  added  to  the  company's  line  in  order  to  permit 
it  to  maintain  its  European  branches  profitably  even 
though  war-time  construction  had  fallen  off.  In  addition 
to  its  foreign  warehouses  the  company  maintains  sales 
branches  in  Madrid,  Milan,  Kio  de  Janeiro,  and  Mexico 
City.  The  branches  in  England,  France,  Italy,  and  Spain, 
are  operated  as  subsidiary  companies  in  order  to  avoid 
paying  excessive  taxes  and  to  comply  with  the  laws  of 
those  countries  requiring  the  publication  of  a  balance 
sheet  without  giving  information  as  to  the  financial  con- 
dition of  the  entire  company.  Generally  speaking,  there 
is  a  demand  for  machine  tools  in  France,  England,  and 
Japan,  and  for  construction  tools  in  parts  of  Latin 
America. 

For  establishing  a  perpetual  inventory  system  which 
would  show  the  material  on  hand  in  each  branch  ware- 
house, the  company  would  require  no  reports  from  its 
branch  managers  other  than  those  it  is  receiving  at  the 
present  time.  Copies  of  sales  slips  from  each  branch 
having  a  warehouse,  as  well  as  orders  from  the  sales 
branches,  are  sent  to  the  home  office,  which  of  course 
also  has  a  record  of  all  goods  that  have  been  ordered 
by  and  shipped  to  each  branch.  As  the  sales  slips  come 
into  the  home  office  it  would  be  comparatively  easy  to 
determine  the  amount  of  each  item  on  hand  at  each 
branch.  On  the  small  staple  items  the  maximum  and 
mininmm  points  would  be  established,  so  that  as  soon  as 
the  amount  available  of  a  certain  item  had  fallen  below 
a  given  amount,  a  clerk  at  the  home  office  would  auto- 
matically put  in  a  replenishment  order.    As  a  consider- 


666     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

able  portion  of  the  material  is  of  large  unit  value,  keep- 
ing the  perpetual  inventory  records  for  each  branch 
warehouse  would  be  comparatively  easy.  Once  every 
month  the  branch  would  send  a  copy  of  its  inventory 
statement,  verified  by  actual  count,  in  order  to  permit 
the  home  office  to  correct  any  clerical  errors  that  had 
occurred. 

By  using  a  perpetual  inventory  the  comjoany  would 
have  a  check  on  the  amount  of  stores  carried  on  hand. 
If  one  branch  warehouse  was  carrying  too  large  an  in- 
ventory, the  records  would  show  what  items  could  be 
reduced.  Not  only  would  the  resulting  inventory  be  a 
saving  in  interest,  insurance,  and  depreciation,  but  it 
would  also  be  a  saving  in  rent,  heat,  light,  labor,  and 
other  charges.  Service  would  also  be  improved,  since  if 
a  sales  branch  in  Italy  demanded  a  steam  roller  for  im- 
mediate use,  it  would  be  a  simple  matter  for  the  home 
office  to  tell  from  its  records  whether  or  not  the  ware- 
house in  London  or  Paris  had  such  a  machine  in  its 
stock.  If  a  steam  roller  were  available  at  one  of  these 
foreign  branches,  the  company  could  cable  the  branch 
manager  asking  how  soon  it  could  be  delivered  to  the  job 
in  Italy.  At  the  same  time  a  telegram  would  be  sent  to 
the  factory  asking  for  the  earliest  date  on  which  a  steam 
roller  could  be  delivered  at  the  New  York  docks.  After 
receiving  replies  from  both  the  factory  and  the  branch, 
the  home  office  would  be  in  position  to  decide  which  ship- 
ment would  be  the  more  expedient  to  make  and  could 
issue  its  orders  accordingly. 

The  perpetual  inventory  records  in  the  home  office, 
however,  would  require  the  services  of  a  mimber  of 
clerks,  and,  in  addition  to  the  inaccuracies  resulting  from 
clerical  errors,  there  would  be  a  delay  of  at  least  two 
weeks  between  the  date  the  goods  were  sold  and  the  date 
the  fact  was  recorded  in  the  home  office  records,  because 
of  the  time  required  for  the  transmission  of  sales  slips 
through  the  mails.  The  records  iji  the  home  office  might 
show  that  a  tractor  was  on  hand  in  the  Paris  branch 
warehouse,  when  as  a  matter  of  fact  it  had  been  sold  ten 


EXPORT  SALES  CONTROL  667 

days  previously.  Furthermore,  replenishing  orders  auto- 
matically on  small  staple  articles  as  soon  as  the  agreed 
minimum  limit  was  reached  might  unnecessarily  increase 
the  inventory  on  hand  in  the  foreign  branches,  since  the 
order  would  not  be  placed  by  the  branch  manager,  who 
would  be  in  position  to  determine  whether  or  not  the 
stock  was  really  required. 

The  counter-suggestion  has  been  made  that  the  com- 
pany should  not  keep  a  perpetual  inventory  record  but 
that  each  branch  should  furnish  the  home  office  with  an 
inventory  statement  once  a  month,  which  would  be  based 
on  actual  count.  From  this  record  the  export  manager 
would  know  approximately  the  amount  of  any  article 
on  hand.  Items  which  appeared  in  excessive  amounts  on 
several  successive  inventories  could  be  checked  with  a 
red  pencil  to  denote  the  need  of  inquiry  with  a  view  to 
reducing  the  amounts  on  hand.  In  the  main,  however, 
this  plan  would  shift  the  work  and  responsibility  for 
inventory  to  the  branch  manager.  The  taking  of  a 
physical  inventory  once  a  month  would  be  no  small  task, 
and  because  of  delay  in  the  mails  the  statistics  given 
would  be  obsolete  before  thev  arrived. 


Problem  158 
Jewel  Electric    Appliance   Company — Planning  a  Budget* 

Because  the  domestic  sales  organization  was  given 
priority  on  all  shipments,  the  export  department  of  the 
Jewel  Electric  Appliance  Company  had  difficulty  in  fill- 

*For  information  upon  budgetary  control,  tlie  following  references  may 
be  consulted:  J.  O.  McKinsey,  Budpct  Making  and  Control;  series  of  ar- 
ticles in  Administration,  January  1921  and  succeeding  months;  Bulletin  of 
the  Taylor  Society,  October  1920,  Coordination  of  Sales  with  Scietitific* 
Production;  L.  Grecndlinger,  Financial  and  Business  Statements;  Pro- 
ceedings of  the  Taylor  Society,  Spring  Meeting,  1921 ;  System,  May  1920, 
Description  of  Budget  System  of  Sherwin-WiUiams  Company;  Journal  of 
Political  Economy,  November  1919,  Accounting  as  an  Administrative  Aid; 
and  the  following  articles  in  Printers'  Ink — July  28,  1921,  A  Monthly 
Photograph  of  Supply  and  Demand;  and  January  20,  1916,  Graphic  Sales 
Pictures  That  Analyse  the  Business. 


668     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

ing  its  orders  in  the  latter  half  of  1919  and  in  the  first 
part  of  1920;  the  following  year  when  foreign  sales  had 
declined,  the  export  department  was  asked  to  dispose  of 
surplus  stocks  consisting  of  $27,500  worth  of  8,  9,  10, 
and  12-inch  electric  fans,  $17,300  worth  of  electric  fiat 
irons,  $14,800  worth  of  electric  heaters  and  $15,450  worth 
of  miscellaneous  electrical  items.  In  January,  1922,  the 
management  was  berating  the  production  department  for 
piling  up  an  inventory  of  $56,000  in  excess  of  the  orders 
received  for  future  delivery.  At  the  same  time  the 
treasurer  was  handicapped  because  credit  extensions  had 
not  been  considered  sufficiently  in  estimating  the  amount 
of  capital  required  to  do  business  in  South  America.  In 
May  the  export  department,  being  unable  to  secure 
prompt  shipment  of  electric  heaters  to  Buenos  Aires, 
lost  two  $3,000  orders  to  a  competitor. 

When  faced  by  a  similar  difficulty  a  prominent  steel 
products  manufacturer  adopted  the  following  system  of 
budgetary  control  in  order  to  secure  coordination  of  the 
sales,  production,  and  financial  programs: 

Inasmuch  as  conditions  differ  in  each  country  and  fre- 
quently vary  in  different  sections  of  the  same  country, 
the  first  step  is  to  divide  the  foreign  territory  covered 
by  the  company's  salesmen  into  districts  having  approxi- 
mately the  same  population  and  living  under  the  same 
general  conditions.  The  foreign  sales  account  tells  the 
export  manager  what  his  best  records  have  been,  not 
only  in  each  country,  l)ut  by  salesmen  and  customer  sales, 
and  by  commodity.  It  is  therefore  comparatively  easy 
to  determine  the  sales  by  commodity  for  each  district. 

With  the  records  of  past  sales  as  a  guide,  an  estimate 
is  made  by  districts  of  the  sales  of  each  commodity  for 
the  next  six  months,  modified  by  existing  business  con- 
ditions. This  estimate  is  then  divided  according  to  quar- 
ters. As  not  infrequently  the  demand  is  seasonal,  it  is 
not  sufficient  to  inform  the  production  department  of  the 
total  amount  of  each  commodity  required  by  the  export 
department  for  the  entire  year.  The  total  amount  re- 
quired for  each  commodity  is  therefore  determined  by 
quarters,  an  allowance  being  made  for  length  of  time 


EXPORT  SALES  CONTROL 


669 


required  for  transportation  to  the  foreign  country,  and 
the  following  reports  submitted  to  the  production  de- 
partment for  its  approval: 


FIKST 

QUARTER  19 

Items 

Sales  for  a 

Estimated 

Esti- 

Esti- 

Amount 

Estimate  of 

correspond- 

sales for 

mated 

mated 

to  be 

probable 

ing    period 

the  first 

inven- 

inven- 

manu- 

special and 

of  last  year 

quarter    of 

tory  de- 

tory on 

fac- 

rush order 

the  pres- 

sired 

hand 

tured 

in  addition 

ent  year 

at  end 

begin- 

by pro- 

to estimated 

of 

ning  of 

duc- 

quantity 

quarter 

quarter 

tion  de- 
part- 

desired 

- 

ment 

This  estimate  is  not  filled  out  in  dollars  and  cents  but  in  units, 
in  order  to  avoid  any  danger  of  misunderstanding  because  of 
fluctuating  price  conditions. 

This  schedule,  together  with  the  schedule  for  the  do- 
mestic sales  department,  goes  to  the  production  depart- 
ment to  be  modified,  if  necessary,  according  to  production 
facilities  available;  the  general  manager  then  holds  a 
conference  with  the  heads  of  all  departments.  Perhaps 
it  may  be  advisable  to  enlarge  the  plant  slightly  to  take 
care  of  additional  production,  or  it  may  be  possible  to 
contract  part  of  the  work  in  other  plants.  Again,  the 
domestic  department  may  suffer  a  serious  hardship  if 
certain  products  on  its  schedule  are  curtailed.  Or  it 
might  be  found  advisal)le,  in  order  to  balance  the  produc- 
tion of  the  plant  and  utilize  all  machinery  and  processes 
to  full  capacity,  to  manufacture  certain  commodities  in 
excess  of  the  amounts  called  for  on  the  schedule,  with 
the  intention  of  having  the  export  department  dump  this 
material  on  the  foreign  market  at  whatever  price  it  will 
bring.    All  these  points  must  be  taken  into  consideration 


670     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

before  final  approval  can  be  given  by  the  general  man- 
ager. 

Having  estimated  the  amount  of  the  product  which  can 
be  sold,  the  next  step  is  to  determine  the  amount  of  money 
required  to  finance  these  shipments  in  each  district.  If 
all  shipments  were  made  cash  against  documents  in  New 
York,  this  amount  could  be  easily  estimated,  but  much 
of  the  company's  business  is  done  on  a  credit  basis.  Even 
if  a  deposit  is  required  in  advance  with  the  balance 
covered  by  a  sight  draft,  payment  against  documents, 
considerable  time  must  elapse  before  the  company  re- 
ceives its  money.  In  the  case  of  Cuba,  two  or  three  weeks 
may  be  sufficient  to  cover  the  time  consumed  from  the 
date  the  papers  are  sent  out  from  New  York  and  when 
payment  is  received,  but  in  dealing  with  Buenos  Aires  or 
Sydney,  Australia,  a  much  longer  period  must  elapse. 

The  buying  customs  of  different  peoples  must  be  also 
taken  into  account.  In  England  at  one  period  the  com- 
pany found  it  was  the  general  policy  in  buying  steel  forms 
to  pay  cash  against  documents,  while  in  China,  on  the 
same  commodity,  30,  60,  or  possil^ly  90  days'  credit  was 
necessary.  Not  only  does  the  season  affect  the  buying 
period,  but  it  also  affects  the  paying  period.  In  Brazil 
the  buying  peak  may  come  while  the  cotfee  crop  is  being 
grown,  but  payment  can  hardly  be  expected  until  the 
coffee  beans  have  been  picked,  prepared  for  market,  sold, 
and  the  payment  received.  Even  though  the  terms 
agreed  upon  by  the  buyer  and  seller  may  specify  pay- 
ment in  30  or  60  days  after  acceptance,  payment  is  not 
assured,  for  an  extension  may  be  requested  because  of 
unfavorable  exchange  rates,  poor  business  conditions,  or 
for  many  other  reasons.  As  frequently  these  requests 
cannot  be  refused,  an  allowance  must  be  made,  based  on 
past  records,  modified  according  to  rates  of  exchange, 
Imsiness  conditions,  crop  prospects,  and  the  political  and 
financial  condition  of  the  country,  for  all  these  factors 
have  their  effect  upon  the  quickness  of  securing  payment. 
These  same  factors  aifect  the  allowance  which  must  be 
made  to  cover  bad  debts. 


EXPORT  SALES  CONTROL  671 

The  budget  for  expenses  is  made  out  based  on  the  esti- 
mate for  salesmen's  salaries  and  expenses,  the  salaries 
of  the  office  force,  and  the  other  charges,  such  as  rent 
heat,  light,  communication,  office  supplies,  and  other  ex- 
penses. As  far  as  possible  this  expense  estimate  is  dis- 
tributed to  each  district  in  order  to  determine  the  amount 
of  profit  which  the  estimated  business  will  produce. 

These  estimates  of  the  export  department,  together 
with  the  estimates  of  the  domestic  sales  department,  pro- 
duction, and  administrative  divisions,  are  submitted  to 
the  treasurer,  who  decides  whether  or  not  they  can  be 
met.  If  they  cannot  bo  met  he  makes  recommendations  as 
to  where  the  budget  should  be  pared  down,  based  on  the 
probable  effect  on  profits.  He  must  also  decide  whether 
the  company's  need  for  capital  is  to  be  met  by  borrow- 
ing from  the  bank,  or  by  discounting  the  drafts  of  its 
customers.  In  case  the  latter  method  is  selected,  care 
must  be  taken  that  a  reserve  or  additional  lines  of  credit 
are  available  to  reimburse  the  banks  on  customers'  drafts 
which  have  been  discounted  but  which  were  dishonored 
upon  presentation  for  payment. 

Final  adjustments  and  approval  of  the  budget  are  made 
by  the  general  manager  and  the  president.  Although  the 
budget  is  made  out  six  months  in  advance,  each  quarterly 
budget  is  reapproved  just  prior  to  being  put  into  effect. 
Even  after  the  budget  has  been  put  into  effect,  adjust- 
ment must  be  made  from  time  to  time  to  take  care  of  un- 
foreseen conditions.  This  is  particularly  true  in  a  rapidly 
changing  market. 

This  plan  of  budgetary  control*  used  by  the  steel  com- 
pany has  been  carefully  examined  by  the  president  of 
the  Jewel  Electric  Appliance  Company  as  a  possible  solu- 
tion for  the  present  difficulties  faced  by  his  company. 
The  president,  however,  is  dubious  about  adopting  the 
proposed  scheme  because  of  its  complicated  nature.  He 
explained  his  position  as  follows : 

*Further   information    on   budgetary   control    can    be    secured    from    the 
articles  by  J.  O.  McKinsey  in  Administration,  vol.  1,  1921. 


672     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

"Our  company  is  small  and  has  only  three  salesmen  in  the 
foreiorn  field.  Althouuh  we  receive  some  additional  orders 
through  commission  houses,  our  foreign  business  is  not  large. 
The  same  situation  holds  true  in  the  domestic  market  where 
we  have  a  good  many  more  salesmen.  Of  course,  we  have  ac- 
curate records  of  all  our  sales,  but  as  each  of  our  salesmen  covers 
several  countries  it  would  be  difficult  to  split  each  territory  up 
into  districts  where  the  same  conditions  prevail.  At  present  one 
salesman  covers  the  West  Indies  and  Mexico,  another  the  north- 
ern and  western  coast  of  South  America,  and  a  third,  Brazil, 
Uruguay,  Paraguay,  and  Argentina. 

"At  the  present  time  our  greatest  difficulty  is  in  meeting 
competition.  It  seems  to  me  that  the  budgetary  plan  of  the 
steel  company  makes  no  provision  of  modifying  these  estimates 
because  of  competition.  In  fact,  I  doubt  seriously  if  this  would 
be  feasible  since  it  is  impossible  for  us  to  plan  on  our  competi- 
tors' actions.  On  the  whole,  although  I  am  favorably  impressed 
with  the  budgetary  plan  which  has  been  described,  it  seems  to 
me  to  be  too  complicated  and  too  unwieldly  to  be  placed  in 
operation  in  the  Jewell  Electric  Appliance  Company.  I  would 
be  glad,  however,  if  some  modified  plan  of  this  type  could  be 
devised  which  would  meet  the  needs  of  a  small  company." 


GENERAL  PROBLEMS  OF  EXPORT  MANAGEMENT 

Any  consideration  of  problems  of  the  export  manager 
will  indicate  that  certain  problems  are  of  such  great  im- 
portance or  of  such  general  application  that  they  will  be 
decided  not  by  the  export  manager  alone,  but  by  the  ex- 
port manager  in  consultation  with  the  general  officials 
including  the  board  of  directors  and  the  president.  Ac- 
tion upon  some  of  these  questions  must  be  referred  to 
administrative  officials  because  it  involves  other  depart- 
ments— for  instance,  a  policy  of  extensive  credit  grant- 
ing upon  open  credit  is  of  extreme  significance  to  the 
financial  departments.  likewise,  the  administration  will 
always  decide  wiietlier  export  trade  shall  be  undertaken 
or  not.  Often  it  will,  by  the  limitations  which  it  imposes, 
determine  the  method  of  distribution.     More  frequently 


GENERAL  PROBLEMS  673 

than  not,  it  is  the  administration — including  the  higher 
officials  and  the  board  of  directors— that  detorinines^the 
establishment  of  branches.    In  short,  the  administration 
will  reserve  the  right  to  act  upon  major  policies.     There 
are  also  the  broad  policies  of  economic  policy  regarding 
foreign  trade,  which  are  both  directly  of  interest  to  the 
export  department  and  indirectly  of  interest  to  the  whole 
business  enterprise  and  to  every  business  enterprise  in 
the  community.  National  policies,  such  as  those  embodied 
m  the  tariffs,  profoundly  affect  the  foreign  trader.    The 
exporter  and  importer  daily  come  in  contact  with  tariff 
problems.    The  policy  of  a  concern  with  respect  to  tariffs 
has  its  effect  first  of  all  upon  the  competitive  ability  of 
the  exporter— it  has  many  more  detailed  results  with 
respect  to  documentation,  packing,  and  the  like      The 
importer  is  affected  directly  by  the  domestic  tariff,  both 
by  the  tariff  itself  in  its   effect   upon  importation   of 
foreign  goods  and  in  its  effect  upon  foreign  nations  by 
retaliation.     The   exporter  is  likewise  aft'ected  bv  the 
domestic  tariff',  the  effect  of  which  is  to  curtail  imports 
and  therefore  curtail  foreign  buying  power.     Further- 
more, domestic  tariffs  may  lead  to  retaliation,  in  which 
case  the  ability  of  the  American  exporter  to  compete  in 
a  foreign  market  is  reduced.     Sectional  and  local  legis- 
lation, local  ordinances,  and  the  like  also  have  their  in- 
terest for  the  foreign  trader  because  in  carrying   on 
transactions  in  a  foreign  country,  he  must  complv  with 
the  laws  of  two  jurisdictions.     He  finds  that  in  some 
countries  commercial  disputes,  which  are  bound  to  occur 
are  adjudicated  by  local  courts.    In  other  countri-es  par- 
ticularly those  which  are  very  weak  politically,  commer- 
cial disputes  will  be  handled  by  our  own  courts  or  by 
courts  of  other  nations  because  of  the  existence  of  courts 
with  extra-territorial  jurisdiction. 


674     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Problem  159 
Myers  &  Company — Continuing  of  Foreign  Trade 

Myers  &  Company  manufacture  insulated  copper  wire 
and  cable  used  for  electrical  purposes.  Their  product 
varies  from  the  small  insulated  wire  intended  for  portable 
lamps,  to  the  heavy  triple  armored  ocean  cable  such  as 
is  used  off  the  Rock  of  Gibraltar  where  the  action  of 
the  waves  on  rocky  reefs  causes  even  the  most  protected 
cables  to  become  useless  after  two  or  three  years.  The 
company's  annual  volume  of  business  is  about  $4,300,000, 
of  which  $350,000  is  made  up  of  exports.  In  its  early 
development  the  company  exported  little,  but  during  the 
World  War  it  began  accepting  foreign  orders.  At  first 
shipments  were  always  accepted  and  paid  for  promptly 
by  the  foreign  customers,  but  later  the  company  had 
some  difficulty  in  securing  acceptance  and  payment  for 
the  goods  after  they  had  been  shipped. 

Usually  foreign  orders  of  this  company  were  handled 
through  a  New  York  bank  having  branches  in  the  country 
to  which  the  goods  were  being  sent.  This  bank  assumed 
the  responsibility  of  making  out  all  the  papers.  In  most 
cases  a  60-day  or  90-day  draft  accompanied  the  docu- 
ments. As  long  as  the  exchange  rates  remained  some- 
where near  par,  these  drafts  were  not  only  accepted  by 
the  foreign  buyers  but  frequently  were  paid  within  a  short 
time  after  the  goods  arrived,  so  that  the  purchasers  could 
avail  themselves  of  the  cash  discounts  offered.  When  the 
exchange  of  most  of  the  foreign  countries  was  at  a  dis- 
count, 'however,  the  foreign  buyers  had  more  and  more 
difficulty  in  meeting  their  bills  and  in  several  instances 
the  drafts  were  not  paid  after  they  had  been  accepted. 
This  meant  that  the  customer  had  possession  of  the  mer- 
chandise and  Myers  &  Company  held  a  dishonored 
acceptance.  In  other  instances  tlie  goods  were  not  ac 
cepted  after  they  had  arrived. 

Such  a  condition  prevailed  in  Belgium.  For  two  or 
three  years  a  Belgian  firm  had  been  l)uying  electric  wire 
and  cable  from  Myers  &  Company.     This  customer  had 


GENERAL  PROBLEMS 


675 


always  honored  his  drafts,  frequently  claiming  the  dis- 

$lo,000  worth  of  high-grade  wire.  Very  elaborate  tests 
were  required  and  the  plant  was  put  to  considerable 
expense  to  turn  out  the  order.  On  July  1],  when  two- 
thirds  of  the  order  had  been  packed  in  cases  and  was 
ready  tor  shipment,  Myers  &  Company  received  a  cable- 
gram asking  if  immediate  shipment  was  to  be  made 
Ihe  company  replied  in  the  affirmative  and  the  entire 
shipment  was  sent  off  two  days  later.  On  Julv  20 
another  cablegram  arrived  cancelling  the  order.  Since' 
the  wire  was  manufactured  according  to  foreign  stand- 
ards. It  was  of  no  value  in  the  domestic  market  The 
company  was  unable  to  find  another  foreign  purchaser 
and  the  wire  is  still  m  storage  in  Brussels. 

A  slightly  different  situation  occurred  in  Portugal  a 
tew  monthslater  when  payment  was  refused  on  $13,000 
^.jorth  of  wire  which  had  been  ordered  bv  the  firm  of 
Moro  Gomezetto.  This  firm  had  alwavs  paid  its  bills 
promp  ly  in  the  past,  but  when  the  rate  of  eLhange  w^ 
against  It  al  hough  it  received  the  wire  and  accepted  the 
di^ait.  It  failed  to  make  payment  when  the  draft  was 

These  instances  are  more  or  less  typical  of  what  has 

Myers  &  Company  have  thousands  of  dollars  worth  of 
^vire    made  according  to  foreign  standards,   stored  in 
warehouses  m  foreign  countries.     On  other  lits  of  wii4 
which  are  in  the  possession  of  custom'ers,  the  firm  holds' 
drafts  which  have  been  dishonored.     Fo^  these  reason 
he  company  is  considering  the  advisabilitv  of  discon 
tmumg  its  foreign  trade.  ' 

In  the  United  States  it  would  be  possible  to  turn  over 

^^^'  'V:'  ""'in  ''  '''''-''  «^-^  ^--^  ^f  ad- 
justment.      When  they  have  resorted  to  litigation  in 

foreign   countries,    however,    Myers   &    Company   have 

usually  found  that  the  lawyers  sympathized  wtl  ttlr 

:Str^s:-anir  "^  --'  ^-^^-^  -- 


676     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Several  times  the  company  has  reshipped  the  wire  to 
other  countries  having  the  same  standards  for  electric 
cables.  Almost  every  time,  however,  the  rate  of  exchange 
was  against  the  United  States  and  in  only  three  instances 
was  the  company  able  to  dispose  of  its  product  even  at 
big  reduction  after  paying  additional  freight  rates  and 
storage  charges. 

If  the  company  decides  to  continue  its  foreign  trade 
it  must  discontinue  all  exporting  temporarily  until  the 
rates  of  exchange  are  more  favorable,  at  which  time  the 
shipments  now  being  held  in  foreign  countries  can  be 
disposed  of- at  a  price  somewhere  near  the  cost  of  manu- 
facture. This  step  would  require  the  payment  of  large 
sums  of  money  for  storage  charges,  however,  and  prob- 
ably no  profit  could  be  realized  on  the  sale  of  these  goods. 
At  the  same  time,  such  a  policy  would  leave  the  field  open 
to  competitors  and  in  all  probalnlity  foreign  manufac- 
turers would  have  things  so  well  ''sewed  up"  that  it 
would  be  difficult  for  the  firm  to  regain  its  market. 

It  is  proposed  therefore  to  discontinue  the  export  busi- 
ness completely.  Myers  &  Company  originally  manu- 
factured electric  wire  and  cable  only  for  domestic  use. 
This  business  is  still  of  sufficient  volume  to  enable  it 
to  maintain  a  profitable  business  without  entering  foreign 
markets.  Its  foreign  sales  have  been  but  a  small  pro- 
portion of  its  total  and  it  has  never  considered  them 
important  enough  to  warrant  the  establishment  of  a  sales- 
force  in  the  foreign  field. 

Its  export  shipments  must  be  treated  as  special  orders 
because  of  the  different  standards  allowed  in  the  coun- 
tries abroad.  The  Board  of  Fire  Underwriters  has  laid 
down  definite  specifications  for  insulated  wire  used  for 
electrical  purposes  in  the  United  States.  For  example, 
on  all  No.  14  copper  wire  they  require  5/,')2  of  an  inch 
insulation.  The  requirements  are  also  definite  as  to  what 
constitutes  satisfactory  insulation  and  the  size  of  wire 
required  for  specific  loads.  In  most  foreign  countries, 
however,  the  requirements  are  not  so  strict  and  insu- 
lation of  approximately  4/32  of  an  inch  on  No.  14  cop- 


GENERAL  PROBLEMS  677 

per  wire  is  accepted  as  satisfactory.  Consequently,  if 
Myers  &  Company  are  to  sell  in  the  foreign  market,  they 
must  manufacture  insulated  wire  according  to  these  for- 
eign specifications ;  for  if  American  standard  ^\dre  were 
exported  the  price  would  be  too  high  to  enable  the  com- 
pany to  compete  with  foreign  manufacturers. 

Should  Myers  &  Company  give  up  its  export  business? 


Problem  160 

Independent  Woolen  Export  Corporation — Liquidating  of 
Export  Business 

The  Independent  AVoolen  Company  was  organized  to 
secure  the  proper  distribution  of  the  product  of  a  num- 
ber of  independent  woolen  mills  in  the  United  States. 
For  a  number  of  years  it  confined  its  activity  to  the 
United  States  and  Canada,  but  about  1912  it  beg-an  send- 
ing some  woolen  fabrics  to  South  America.  With  the 
outbreak  of  the  world  war  in  1914,  the  greatly  increased 
demand  for  woolen  cloth  in  Europe  caused  the  export 
business  of  the  Independent  Woolen  Company  to  become 
more  and  more  important.  The  amount  of  exports 
finally  became  so  large  that  it  was  difficult  for  the  com- 
pany to  handle  its  foreign  business  properly.  So  many 
operating  costs  apphed  to  both  the  domestic  and  foreign 
business  that  with  the  existing  organization  it  was  prac- 
tically impossible  to  determine  the  exact  costs  and 
profits  resulting  from  the  export  business. 

Early  in  1916  it  was  decided  to  organize  the  Inde- 
pendent Woolen  Export  Corporation  as  a  subsidiary  of 
the  Independent  Woolen  Company  to  handle  the  hitter's 
export  business.  This  new  organization  was  capitalized 
for  $15,000,  but  it  soon  became  evident  that  this  sum  was 
too  small  and  later  in  the  year  the  amount  of  capitali- 
zation was  increased  to  $150,000.  The  corporation  es- 
tablished branches  in  London,  Paris,  Eio  de  Janeiro, 
Buenos  Aires,  and  Santiago.    It  built  up  a  large  force  of 


678     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

American  salesmen,  sending  them  abroad  after  six  to 
nine  months  of  training.  The  foreign  sales  volume  of 
the  export  corporation  increased  rapidly,  and  three 
years  after  the  date  of  its  founding  the  balance  sheet 
showed  that  the  corporation  had  undivided  profits  of 
$530,000,  a  surplus  of  $290,000,  and  a  capitalization  of 
$150,000,  giving  a  total  of  a  little  less  than  $1,000,000 
available  capital. 

Although  trade  with  Europe  fell  oft"  Avith  the  termina- 
tion of  the  war,  export  sales  to  South  America  continued 
to  increase.  In  the  spring  of  1920  the  corporation  had 
on  its  books  foreign  orders  amounting  to  more  than 
$18,000,000,  but  by  May  so  many  cancellations  had  oc- 
curred that  the  treasurer  held  up  over  $4,000,000  of  orders 
pending  confirmation.  The  subsequent  cancellation  of  a 
large  proportion  of  these  orders  proved  that  he  had 
shown  good  judgment.  The  situation  was  further  com- 
plicated by  the  fact  that  the  Independent  Woolen  Export 
Corporation  has  rediscounted  with  the  banks  several 
milion  dollars'  worth  of  drafts  which  had  been  accepted 
by  South  American  customers.  When  a  number  of  these 
customers  failed  to  meet  their  obligations,  it  Avas  neces- 
sary for  the  corporation  to  borrow  almost  a  million  dol- 
lars to  reimburse  these  banks. 

In  the  summer  of  1921,  with  exchange  rates  and  low 
production  costs  favoring  the  importation  of  European 
goods  into  South  American  markets,  the  competition  of 
German  and  English  woolen  mills  was  very  keen.  The 
prices  asked  by  the  mills  of  the  different  countries  for 
a  yard  of  the  same  grade  of  woolen  cloth  were  as  fol- 
lows : 

American    $2.50' 

English    1 .75 

German    ■..    1.00 

In  the  domestic  market,  when  the  company  has  suf- 
fered a  loss  one  year,  it  has  usually  been  possible  to 
make  up  this  loss  the  next;  but  with  Kjiiglisli  and  German 
competition  in  the  foreign  field,  the  directors  of  the  Inde- 


GENERAL  PROBLEMS  67» 

pendent  Woolen  company  could  not  see  any  chance  of  re- 
gaining their  position  in  the  market  or  recovering  their 
losses  in  the  near  future.  Business  conditions  in  Latin 
America  continued  to  be  unsettled.  The  Independent 
Woolen  Company  had  been  organized  primarily  to  dis- 
tribute the  products  of  its  mills  in  the  United  States  and 
for  almost  a  year  and  a  half  it  had  lost  money  in  the  for- 
eign field.  Early  in  the  fall  of  1921  the  directors  of  the 
Independent  Woolen  Company,  believing  that  the  time 
had  come  to  get  out  of  the  foreign  field,  ordered  the 
dissolution  of  the  Independent  Woolen  Export  Corpo- 
ration. Steps  were  taken  immediately  to  wind  up  the 
affairs  of  this  subsidiary  corporation,  foreign  branches 
were  discontinued,  the  sales  organization  disbanded,  and 
by  February  1,  1922  the  liquidation  had  been  completed. 
Was  this  the  proper  time  for  the  liquidation  of  the  In- 
dependent Woolen  Export  Corporation? 


Problem  161 

The  Baldwin  Locomotive  Works — Pushing  Foreign  Trade 
During  Depression 

The  American  Locomotive  Company  in  1921  was  oper- 
ating at  10%  of  capacity  on  domestic  orders;  the  Bald- 
win Locomotive  Works  was  operating  at  30%  of  ca- 
pacity on  domestic  and  foreign  orders.  The  president 
of  the  latter  company  had  made  a  special  effort  to  obtain 
foreign  business  during  the  depression  of  1921. 

These  two  companies  manufacture  the  same  class  of 
products,  have  about  the  same  capacity,  and  are  capital- 
ized approximately  on  the  same  basis.  American  Loco- 
motive has  $25,000,000  each  of  preferred  and  common 
stocks  and  $],9I)2,()()0  underlying  bonds,  a  total  of 
$51,932,000.  The  Baldwin  conipany  has  $20,000,00  each 
of  preferred  and  common  stocks  and  $12,400,000  bonds 
of  its  own  and  Standard  Steel  Works,  a  total  of 
$52,400,000. 


680     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

In  1921,  in  the  midst  of  the  worst  depression  in  its 
history,  the  Baldwin  company  in  order  to  keep  its  plants 
running  contracted  for  a  large  volume  of  foreign  busi- 
ness— Polish,  Mexican,  and  Argentinian — on  long-term 
credits.  It  had  on  its  balance  sheets  for  some  time  nearly 
$7,000,000  in  notes  of  the  Polish  government.  Later  it 
extended  a  $6,500,000  credit  to  Argentina  and  another 
of  several  millions  to  ]\Iexico. 

The  management  of  the  American  Locomotive  Com- 
pany, on  the  other  hand,  took  the  position  that  it  was 
time  to  conserve  cash  and  prepare  for  a  revival  in 
domestic  demands.  It  avoided  extending  credits,  ex- 
cept on  what  appeared  to  be  gilt-edged  security.  In 
1921  its  current  assets  consisted  mostly  of  United  States 
Government  obligations.  New  York  City  notes,  and 
about  $5,000,000  Belgian  treasury  notes.  On  these  it  re- 
ceived interest  more  than  sufficient  to  meet  its  preferred 
dividend. 

The  profits  of  the  Baldwin  company  for  1921  were 
estimated  at  $23  per  share  on  the  common  stock;  the 
profits  of  the  American  Locomotive  for  the  same  year 
were  estimated  as  being  about  half  as  large  as  those  of 
the  Baldwin  company. 

The  securities  of  both  companies  are  listed  on  the  New 
York  Stock  Exchange.  The  common  stocks  of  both  com- 
panies generally  advance  and  decline  together,  but  Bald- 
win conmion  generally  moves  at  a  more  rapid  rate.  For 
example,  in  1919  Baldwin  made  a  high  of  156  and  in  1921 
a  low  of  62,  a  loss  of  94  points  or  60%.  In  the  same 
period  American  Locomotive  made  a  high  of  117  and  a 
low  of  78,  a  loss  of  44  points  or  37%. 

Should  the  American  Locomotive  Company  have  fol- 
lowed tlie  policy  of  the  Baldwin  Locomotive  Works  in 
1921? 


GENERAL  PROBLEMS  681 

Problem  162 
GiLMAN  Company — Establishing  a    Canadian  Mill 

The  Gilman  Company  is  considering  establishing  a 
mill  in  Canada  for  the  production  of  roofing  paper  and 
slate-covered  shingles.  Building  construction  in  certain 
sections  of  Canada,  as  in  many  other  new  countries,  is 
of  a  temporary  type  especially  adapted  to  the  use  of  the 
Gilman  Company's  product.  The  population  of  Canada, 
as  compared  with  that  of  the  United  States,  is  small,  but 
it  is  growing  rapidly  and  the  western  provinces  par- 
ticularly are  being  built  up  by  a  wide-awake  and  progres- 
sive people.  As  many  of  these  people  came  from  the 
United  States  and  are  already  famihar  with  Gilman 
Company's  products,  it  has  been  comparatively  easy 
to  introduce  them  and  the  managers  of  the  company  an- 
ticipate a  good  future  for  their  Canadian  business. 

For  a  numl)er  of  years  the  Gilman  Company  has  oper- 
ated factories  in  the  United  States,  both  on  the  eastern 
seacoast  and  in  the  Middle  West.  Its  rooting  has  a  high 
reputation  for  quality  and  economy  of  service.  Its  prices 
are  comparatively  low  and  the  company  is  undersold  in 
the  local  market  only  by  competitors  with  an  inferior  and 
cheaper  product.  The  firm  has  developed  some  foreign 
trade  in  Mexico,  AVest  Indies,  and  Central  America, 
where  the  construction  of  warehouses,  barracks,  and  sim- 
ilar buildings  by  American  companies  is  of  a  temporary 
type,  like  that  frequently  found  in  our  own  country. 
Trade  has  also  been  developed  with  Australia,  New  Zea- 
land, and  to  a  limited  extent  with  India  and  the  other 
British  colonies. 

In  developing  its  business  in  Canada  the  company 
has  been  selling  direct  to  wholesalers  through  its  own 
salesmen  and  has  been  shipping  most  of  its  Canadian 
orders  from  its  eastern  mills.  Canadian  business  has 
grown  until  the  annual  sales  are  a  little  less  than  $300,- 
000.  The  tariff,  however,  is  so  high  as  to  practically  wipe 
out  all  profit  from  such  transactions.    The  other  British 


682     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

colonies,  with  which  the  company  does  a  business  of  ap- 
proximately $160,000  a  year,  give  a  preferential  duty  on 
goods  from  Canada.  The  company  is,  therefore,  con- 
sidering building  a  Canadian  mill  in  order  to  increase  its 
profit  on  this  kind  of  business. 

Building  costs  are  comparatively  low  and  a  factory 
site  can  be  secured  at  a  desirable  railroad  center  for  a 
reasonable  price.  With  a  return  of  prosperity  building 
costs  may  go  up  and  the  demand  for  roofing  be  greatly 
increased.  They  hesitate  to  build  a  mill,  however,  since 
it  is  estimated  that  in  order  to  operate  efficiently  and 
show  a  normal  profit  a  mill  should  have  an  annual  pro- 
duction of  approximately  $650,000  w^orth  of  roofing.  It 
would  probably  take  nine  or  ten  months  to  build  the  mill. 
The  managers  are  uncertain  as  to  whether  Canada  and 
the  other  British  colonies  will  be  able  to  absorb  the  addi- 
tional amount  of  product  by  the  time  the  mill  is  put  into 
operation. 

Although  the  company  has  ample  capital  and  its  mills 
in  the  United  States  could  carry  the  Canadian  factory 
even  though  it  did  not  make  a  profit,  the  managers  are 
not  enthusiastic  over  saddling  their  present  plants  with 
such  a  burden. 

Should  the  Oilman  Company  establish  a  mill  in  Can- 
ada! 


Problem  163 

The  Kane  Shoe  Company — Discontinuing  Canadian  Plant 

The  Kane  Shoe  Company  is  considering  the  advisa- 
bility of  discontinuing  its  Canadian  factory.  Tliis  plant 
was  established  in  Canada  several  years  ago  in  order 
to  evade  the  (Canadian  tariff"  laws  and  enable  tlie  com- 
pany to  sell  its  shoes  in  ('aiuidiau  territory  in  competi- 
tion with  local  manufacturers.  A  substantial  sales  vol- 
ume has  ])een  develo|)ed,  and  the  shoes  have  l)ecome  well 
known  in  (^anada  through  extensive  advertising.  The 
company  has  experienced  some  difficulty,  however,  xu 


GENERAL  PROBLEMS  683 

operating-  its  Canadian  factory  efficiently,  and,  although 
it  has  built  up  a  substantial  volume  of  sales,  the  percent- 
age of  profit  realized  on  this  business  has  not  been  so 
large  as  was  expected. 

The  Kane  Company  has  built  its  reputation  on  wom- 
en's style  shoes  of  good  quality  and  ^vorkmanship.  It 
sells  its  entire  product  through  its  own  salesmen  to  retail 
stores.  Kane  Company  shoes  are  well  known  throughout 
the  United  States,  and  the  company  has  exported  to  a 
certain  extent  to  South  America  and  Europe.  In  addi- 
tion to  its  Canadian  plant,  the  company  has  a  large  fac- 
tory in  Pennsylyania  and  a  smaller  one  in  New  Jersey. 

In  operating  its  Canadian  factory,  the  company  has 
experienced  difficulty  in  securing  workers  who  are  cap- 
able or  willing  to  maintain  the  same  standard  of  quality 
that  is  maintained  in  the  Pennsylvania  factory.  Because 
the  population  of  Canada  is  much  smaller  than  that  of 
the  United  States  and  the  demand  for  style  shoes  is  con- 
sequently less,  the  Canadian  factory  is  comparatively 
small.  For  this  reason  it  has  difficulty  in  operating  as 
efficiently  as  a  larger  plant.  Since  the  headquarters  of 
the  Kane  Company  are  at  the  main  factory  in  Pennsyl- 
vania, another  obstacle  to  overcome  in  the  capable  ad- 
ministration of  the  Canadian  plant  is  its  distance  from 
the  home  factory.  It  has  been  estimated  that  if  the  Ca- 
nadian factory  were  sold  and  the  money  used  in  increas- 
ing the  production  and  sale  of  the  company's  product  in 
the  United  States,  the  profits  of  the  Kane  Company 
on  this  amount  of  business  would  be  substantially  in- 
creased. 

In  developing  its  Canadian  business  the  company  has 
spent  a  large  amount  of  money.  It  has  built  a  modern 
factory  and  developed  a  capable  salesforce.  I^or  a  num- 
ber of  years  the  firm  has  been  advertising  its  shoes  in  the 
eastern  half  of  the  Dominion  and  has  succeeded  in  build- 
ing up  a  good  reputation  for  its  name  and  trade-mark. 
If  the  company  decides  to  sell  its  factory  it  must  do  so  at 
a  loss,  and  in  addition  will  lose  some  of  the  good-will  that 
has  been  developed  for  its  product,  since  the  tariff  inter- 


684     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

poses  a  serious  difficulty  iu  competing  with  Oanadiau 
factories.  The  Canadian  population  is  growing;  other 
British  colonies  are  looking  with  favor  toward  importing 
shoes  from  Canadian  firms ;  and  there  is  a  possibility 
that  the  Canadian  business  will  develop  much  more 
rapidly  in  the  future. 

By  closing  its  Canadian  factory,  the  company  would 
have  an  opportunity  to  secure  a  royalty  for  the  use 
of  its  name  and  trade-mark  by  a  Canadian  firm.  This 
latter  firm  is  small  but  progressive,  and  would  be  a  sat- 
isfactory representative  for  the  Kane  Company.  If  the 
Kane  Company  accepts  this  offer,  however,  it  must  agree 
not  to  manufacture  or  sell  its  shoes  in  Canada.  In  return 
for  the  Canadian  rights  to  the  Kane  Company's  name 
and  trade-mark  this  Canadian  firm  is  to  agree  to  manu- 
facture shoes  according  to  Kane  standards  and  specifi- 
cations, so  that  the  good-will  of  the  Kane  Company  will 
be  maintained.  Although  the  royalty  offered  w^ould  not 
equal  the  percentage  of  profits  the  company  now  receives 
from  its  Canadian  business,  it  would  to  a  certain  extent 
compensate  it  for  the  expense  it  has  undergone  in  build- 
ing up  its  Canadian  trade. 

Should  the  Kane  Company  discontinue  its  Canadian 
factory!  If  so,  should  it  accept  the  offer  of  the  Canadian 
company  to  pay  a  royalty  for  the  use  of  the  Kane  com- 
pany name  and  trade-mark  in  Canada? 


Problem  164 

The  Rockford  Company — Government  Action  in  the  Export 

Field 

The  Rockford  Company  was  organized  by  the  manu- 
facturers of  cement,  lumber,  and  builders'  supplies  to 
further  the  extension  of  export  trade  in  these  prod- 
ucts. The  company  has  an  extensive  organization  of 
salesmen  in  South  America,  Mexico;  West  Indies,  Philip- 
pines, Japan,  China,  and  Canada.       Its  investment  in 


GENERAL  PROBLEMS  685 

the  United  States  and  abroad  runs  into  several  millions 
of  dollars  and  the  cost  of  operation  of  its  foreign  depart- 
ment is  close  to  $4,000  a  day.  This  company  sold  large 
quantities  of  cement  and  other  construction  supplies  to 
the  allied  governments  for  building  work  during  the  war. 
It  is  now  attempting  to  secure  the  orders  for  most  of  the 
big  construction  jobs  in  the  countries  in  which  it  is  rep- 
resented. 

Although  German  competition  is  felt  to  a  considerable 
extent,  the  principal  grievance  of  the  Rockford  Company 
is  against  the  action  of  the  United  States  Government  in 
scattering  broadcast  information  on  large  foreign  con- 
tracts. For  example,  when  the  Government's  commer- 
cial agents  in  China  learn  that  the  Chinese  Government 
is  about  to  construct  several  hundred  miles  of  concrete 
road,  this  information  is  at  once  sent  to  the  department 
in  AVashington  where  it  is  passed  on  to  all  cement  manu- 
facturers in  the  country  who  desire  this  information. 
The  object  of  the  Government  in  adopting  these  tactics 
is  to  promote  the  foreign  trade  of  American  industries 
and  assist  them  in  meeting  the  competition  of  Germans 
and  other  foreign  houses.  According  to  the  president  of 
the  Rockford  Company,  what  actually  happens,  when 
this  plan  is  put  in  operation,  is  that  a  company  which 
has  never  expended  one  dollar  in  the  development  of  the 
foreign  field  and  which  has  a  very  small  overhead  puts  in 
an  extremely  low  bid  for  the  foreign  order  in  order  to 
dispose  of  its  surplus  abroad.  The  Rockford  Company 
is  unable  to  meet  this  type  of  price  competition  without 
selling  its  product  at  a  point  far  below  that  which  will 
enable  it  to  show  a  profit.  The  result  is  that  American 
companies  without  connections  abroad  are  sometimes 
able  to  ''skim  the  cream"  of  the  foreign  business. 

As  the  president  explained,  the  Rockford  Company 
does  not  object  to  the  Government's  giving  information 
on  large  foreign  contracts  to  legitimate  competitors  of 
the  firm  wiio  also  have  spent  large  sums  of  money  in  de- 
veloping the  foreign  field.  It  does  object  however  to 
having  a  company,  which  has  never  spent  any  money  in 


680     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

furthering  American  interests  abroad,  bid  on  a  large 
contract  with  government  aid  and  cut  the  price  below  the 
figure  at  which  the  Rockford  Company  and  its  legitimate 
competitors  can  afford  to  sell.  The  president  considers 
the  present  situation  as  serious,  but  he  is  uncertain  as  to 
the  tactics  which  his  company  should  adopt.  Should  it 
undertake  to  meet  the  competition  of  other  manufac- 
turers having  a  small  overhead  and  no  investment  in  the 
foreign  field  by  selling  its  products  below  cost,  or  should 
it  be  content  with  small  foreign  orders  in  which  there  is 
little  interest  among  concerns  confining  their  activities  to 
the  States?  If  the  latter  policy  is  followed,  it  will  un- 
doubtedly be  necessary  to  curtail  the  size  of  the  foreign 
organization  of  the  Rockford  Company  to  a  great  extent. 


BIBLIOGRAPHY 


Agger,  E.  E. 

aughinbaugh, 
W.  A. 

Backer 
Edward  L. 


Bastable, 
C.  A. 

Benn, 

Ernest  J.  P. 

Brown,  H.  G. 


Business 
Training 
Corporation 


Calvert, 
Alfred 


Cherington, 
P.  T. 


Clare,  G. 


Clerget, 
Pierre 


Organized   Bank- 
ing. 

Selling  Latin 
America. 

Export 

Technique. 


Theory   of   Inter- 
national   Trade. 

The  Trade  of  To- 
morrow. 

International 
Trade  and 
Exchange. 

12  small  volumes 
comprising    the 
Course   in  For- 
eign Trade 
(listed  under 
authors'  names) 

Shipping   Office 
Organization,     ■ 
Management 
and  Accounts. 

Advertising  as  a 
Business   Force. 

The  ABC  of 

Foreign 
Exchange. 

Manuel 

d'Economie 
Commerciale. 

687 


New  York,  Holt, 
1918. 

Boston,   Small, 
Maynard,    1915. 

New  York,  Busi- 
ness Training 
Corporation, 
1916. 

London. 

Macmillan.  1903. 

New  York, 
Button,  1918. 

New  York, 
Macmillan,  1914. 


London,  Pitman. 


Garden  City,  N. 
Y.,    Doubledav, 
Page,  1913. 

New  York, 
Macmillan,  1893. 

Paris,   Libra irie 
Armand    Colin, 
5    Rue    de    Me- 
sieres,  1909. 


688     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Cooper,  C.  S. 


Crosfield, 
A.  W.  E. 

CULBERTSON, 

w.  s. 


Day,  Clive 
DeHaas,  J.  A. 

De  Haas,  J.  A. 


De  Lima  and 
Santilhano 


Dewey  and 
Shugrue  , 

Duckworth, 
Lawrence 

Dxn)ENEY, 

Frank  M. 


Eder, 

Phanor  J. 


Edwards, 
George  H. 

Einaigl, 

EUGEN 


Foreign  Trade 
Markets  and 
Methods. 

Case  and  Freight 
Costs. 

Commercial 
Policy  in  War 
Time  and  After. 

A  History  of 
Commerce. 

Foreign  Trade  and 
Shipping. 


The  Organization 
of  Foreigji 
Trade. 

Financing.  Part  I 
— Financing 
Foreign    Sales. 

Part  II — Banking 
for  Foreign 
Trade. 

Banking  and 
Credit. 

Principles  of 
Marine  Law. 

The  Exporter's 
Handbook   and 
Glossary. 

Foreign  and 
Home  Law. 


Foreign     Commer 
cial  Credits. 

Handbuch  der 
Export   Praxis. 


New  York, 
Appleton, 


1922. 


London,    Pitman. 


New  York, 
Appleton, 


1919. 


New  York, 
Longmans, 
Green,  1916. 

New  York, 
Alexander 
Hamilton  In- 
stitute, 1919. 

New  York, 
Ronald  Press, 
1922. 

New  York,   Busi- 
ness Training 
Corporation, 
1916. 


New  York, 
Ronald  Press, 
1922. 

London,  Pitman. 


London,  Pitman, 
1916. 

New  York,  Busi- 
ness Training 
Corporation, 
1916. 
New  York, 
McGraw-Hill, 
1922. 
Wien  und  Leip- 
zig, Alfred 
Holder,  1910. 


BIBLIOGRAPHY 


689 


ESCHER^ 

Franklin 

FiLSINGER, 

Ernest  B, 

Ford,  L.  C. 
and  T.  F. 

Fowler,   Rich- 
ards, and 
Talbot. 


Goldsmith, 
P.  H. 


Gonzales,  V, 

GOSCHEN,   G.   J. 


Gow, 
William 

GuYOT,  Yves 


Halsey, 
F.  M. 


Foreign  Exchange 

Explained. 

Exporting  to 
Latin  America. 

The  Foreign 
Trade  of  the 
United   States. 

Export  Houses. 
Part  I— The  Ex- 
port Merchant. 
Part  II— The 
Export  Com- 
mission  House. 
Part  III— The 
Export  For- 
warder. 

A  Brief  Biblio- 
graphij  of 
Books  in  Eng- 
lish, Spanish 
and  Portuguese 
Relati7ig  to  the 
Republics   Com- 
monly Called 
Latin-America, 
with   Comments. 

Modern  Foreign 
Exchayige. 

The  Theory  of  the 
Foreign 
Exchanges. 

Sea  Insurance 
according  to 
British  Statute. 

Le  Commerce  et 
les   Commer- 
gants. 

Railway 

Expansion  in 
Latin  America. 


New  York, 

Macmillan,  1917. 
New  York, 

Appleton,   1916. 
New  York. 

Scribner's,  1920. 

New  York,  Busi- 
ness Training 
Corporation, 
1916. 


New  York, 
Macmillan,  1915. 


New  York, 

C.  F.  Hammond 
&  Co.,  1914. 

London,  Effing- 
ham Wilson, 
1879. 

London, 
Macmillan,  1914. 

Paris,  0.  Doin  et 
Fils,  Editeurs, 
8  Place  de 
rOdeon,  1909. 

New  York, 

Oliphant,  1916. 


690     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Hauser,  Henri 

Hellauer, 
Josef 

Henius,  F. 
Herzog,  S. 


Hooper  and 
Graham 

Hough, 
B.  Olney 


Hough, 
B.  Olney 


HUEBNER, 

G.  G. 

HuEBNER, 

G.  G. 

Hutchinson, 
Lincoln 


Johnson, 
Emory  R. 


Johnson  and 

HuEBNER 


Johnson  and 

HUEBNER 


Germany's  Com- 
mercial Grip  on 
the  World. 

System  der  Wel- 
thandelslehre. 

The  A.  B.  C.  of 
Foreign  Trade. 

The  Future  of 
German 
Industrial 
Exports. 

Import  and 
Export  Trade. 

Ocean   Traffic   and 
Trade. 

Fractical 
Exporting. 


Marine   Insurance. 

Ocean  Steamship 
Traffic 
Management. 

Panama  Canal 
and  Interna- 
tional Trade 
Competition. 

Ocean  and  Inland 
Water  Trans- 
portation. 

Shipping  in  Its 
Relation  to  Our 
Foreign  Trade. 

Principles  of 
Ocean  Trans- 
portation. 


New  York, 

Scribner's,  1918. 

Berlin,  Puttkam- 
mer  &  Miihl- 
brecht,  1910. 

Indianapolis, 
Bobbs-Merrill, 
1920. 

Garden  City,  N. 
Y.,  Doiibleday, 
Page,  1918. 

London, 

Macmillan,  1899. 

Chicago,  LaSalle 
Extension  Univ., 
1914. 

New  York,  Johns- 
ton Export  Pub- 
lishing Co., 
1919. 

New  York,  Apple- 
ton,  1920. 

New  York,  Apple- 
ton,  1920. 

New  York,  Mac- 
millan, 1915. 


New  York,  Apple- 
ton,  1911. 

New  York.  Busi- 
ness Training 
Corporation, 
1916. 

New  York,  Apple- 
ton,  1920. 


BIBLIOGRAPHY 


691 


Kelly  Pub- 
lishing  Co. 


KiDD, 

Howard  C. 


MacElwee, 
R.  S. 

MacElwee 
AND  Taylor 

McKlNSEY, 

J.  0. 

Mahony, 
Paul  R. 


Margraff, 
A.  W. 


Marshall, 
Alfred 

Martin,  C.  C. 


Mathewson, 
Park 

Metcalf  and 
Tead 

Moore,  J.  T.  M. 
Moore,  W.  V. 


Customs  Tariffs 
of  the  Woi'ld. 

Kidd  on  Foreign 
Trade. 

Ports  and  Ter- 
minal Facilities. 

Wharf  Manage- 
ment and  Steve- 
doring. 

Budgetari/ 
Control. 


The  Export 
Salesman. 


International 
Exchange. 

Industry  and 
Trade. 

Export  Packing. 


Acceptances : 
Trade  and 
Bankers. 

Personnel  Admin- 
istration. 

American  Busi- 
ness in  World's 
Markets. 

Law    of   Commer- 
cial Paper. 


New  York.  Kelly 
Publishing  Co., 
1920. 

New  York.  Pren- 
tice-Hall, 
1921. 

New  York, 
McGraw-Hill, 
1918. 

New  York,  Apple- 
ton,  1921. 

New    York, 
Rouald  Press, 
1922. 

New  York,  Busi- 
ness Training 
Corporation, 
1916. 

Chicago,  Fergus 
Printing  Co., 
1904. 

London,  Mac- 
millan,  1919. 

New  York,  Johns- 
ton Export 
Publishing 
Co.,  1921. 

New  York,  Apple- 
ton,  1921. 

New  York, 
McGraw-Hill, 
1920. 

New  York,  Doran, 
1919. 

New  York,  Apple- 
ton.  1918. 


692     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


NOTZ  AND 

Harvey 

Owen,  Douglas 

Owen, 
Robert  L. 

Patterson, 
E.  L.  S. 

Pepper, 
Charles  M. 

Poor,  Wharton 


Powell, 
Ellis  T. 

Pratt,  Edward 

EWING 


Pratt,  Porter, 
AND  Kennedy 


Preciado,  a,  a. 

Rush, 

Benjamin 

Savay,  Norbert 

Selfridge,  H.  G. 


American 

Foreign  Trade. 

Ocean  Trade  and 
Shipping. 

Foreign  Exchange. 

Domestic  and 
Foreign 
Exchange. 

American  Foreign 
Trade. 

Charier  Par-ties 
and  Ocean  Bills 
of  Lading. 

The  Evolution  of 
the  Money  Mar- 
ket (1385-1915). 

International 
Trade. 


Export  Policies. 
Part  I— Deter- 
mining Export 
Policies. 

Part  II— Export 
Policies  Em- 
ployed in  Cer- 
tain Lines. 

Exporting  to  the 
World. 

Marine  Insurance 
(Hull). 

Priiiciples  of  For- 
eign Trade. 

The  Romance  of 
Commerce. 


Indianapolis, 
Bobbs-Merrill, 
1920. 

New  York,  Put- 
nam, 1914. 

New  York,  Cen- 
tury, 1919. 

New  York,  Alex- 
ander Hamilton 
Institute,  1917. 

New  York,  Cen- 
tury, 1919. 

Albany,  N.  Y., 
Matthew  Bender 
&  Co.,  1920. 

London,  Pitman. 


New  York,  Busi- 
ness Training 
Corporation, 
1920. 

New  York,  Busi- 
Ness  Training 
Corporation, 
1916. 


New  York, 

McCann,  1920. 

New  York,  C.  H. 
Jones  &  Co., 
1918. 

New  York.  Ronald 
Press,  1919. 

New  York,  Lane, 
1918. 


BIBLIOGRAPHY 


693 


Shugrue, 
Martin  J. 

Slater,  J.  A. 


Smith,  J. 

RUSSEL 

Snow,  Chaun- 
CEY  Depew 


sonnendorfer- 

Ottel 

Spalding,  W.  F. 


Stephanson, 
James 

Stern,  Carl  W. 


Stevens,  R.  W. 

Taussig,  F.  W. 
Taussig,  F.  W. 

Todd,  J.  A. 


Problems  in  For- 
eign Exchange. 

Dictionary  of 
World's  Com- 
mercial Prod- 
ucts. 

Influence  of  the 
Great  War  upon 
Shipping. 

Factors  in  Trade- 
Building. 


Die  Technik  des 
Welthandels. 
(2  volumes) 

Foreign  Exchange 
and  Foreign 
Bills. 

The  Principles  and 
Practice  of 
Commerce. 


Importing. 


Stowage  of  Ships 
and  Their 
Cargoes. 

Principles  of 
Economics. 
(Third  edition) 

Selected  Readings 
in  International 
Trade  and  Tariff 
Problems. 

The  Mechanism  of 
Exchange. 


New  York,  Apple 
ton,  1920. 

Xew  York,  Pitman, 
1912. 


New  York,  Oxford 
University 
Press,  1919. 

New  York,  Busi- 
ness Training 
Corporation, 
1916. 

Wien  und  Leipzig-, 
Alfred  Holder, 
1912. 

New  York, 
Pitman,  1915. 

London,  Put- 
nam's, 1915. 

New  York,  Busi- 
ness  Training 
Corporation, 
1916. 

London,   Long- 
mans,  Green   & 
Co. 

New  York.  Mac- 
millan,  1921. 

Boston,  Ginn, 
1921. 


London,   Oxford 
University 
Press,  1919. 


694     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


TOSDAL, 

Harry  R. 

Vanderlip, 
F.  A. 

Vedder,  C.  C. 


VosE,    Edward 
Neville 


Westerfield, 
R.  B. 

Whitaker, 
A.  C. 

White, 
Percival 

Wilcox  and 

RiNES 


Winter, 
William 

Withers,  H. 


Wolfe, 
Archibald  J. 


Wyman, 
Walter  F, 


The  New  England 
Exporter. 

What  Happened 
to  Europe? 

American  Methods 
in  Foreign 
Trade. 

The  World's 
Markets. 


Banking  Principles 
and  Practice. 

Foreign  Exchange. 

Market  Analysis. 

Encyclopedia  of 
Latin  America. 

Marine  Insurance. 

International 
Finance. 

Theory  and   Prac- 
tice  of  Inter- 
national Trade. 

Direct  Exporting. 


Boston  Chamber 
of  Commerce, 
1922. 

New  York,  Mae- 
millan,  1919. 

New  York,  Mc- 
Graw-Hill, 1919. 

New  York,   Busi- 
ness Training 
Corporation, 
1916. 

New  York,  Ronald 
Press,  1921. 

New  York,  Apple- 
ton,  1919. 

New  York,  Mc- 
Graw-Hill, 1921. 

New  York,  En- 
cyclopedia 
Americana  Cor- 
poration,   1917. 

New  York,  Mc- 
Graw-Hill, 1919. 

London,   Smith, 
Elder,   1910. 

New  York,  Inter- 
national Book 
Publishing  Co., 
1919. 

New  York,  Busi- 
ness Training 
Corporation, 
1916. 


BIBLIOGRAPHY  695 

Wyman,  Export  New  York,  Mc- 

Waltfr  F.  Merchandising.  Graw-Hill,  1922. 

ZiMMERMANN,  Occan  Skipping.  New  Y'ork,  Pren- 

E.  W.  tice-Hall,  1919. 

BIBLIOGRAPHICAL  FOOTNOTES 

Furtlier    information    may    be    found  in  the  bibliographical   footnotes   to 
the  following  problems : 

Advertising  and  Direct-mail  Selling. 

Problems  79  and  82. 
Banking,  Finance  and  Documentation. 

Acceptances  and  bills  of  exchange — Problem  119. 

Act  of  protest — Problem  135. 

Bill  of  lading — Problem  153. 

Credit  policy — Problems  23  and  121. 

Curtailment  of  credits — Problem  123. 

Drafts— Problem  119. 

Documentation  of  an  export  order — Problem  138. 

Extension  of  credit  terms — Problem  122, 

Filling  orders— Problems  138  and  139. 

Foreign  exchange — Problem  119. 

Insurance  of  credit — Problem  128. 

Letters  of  credit — Problem  130. 

Management  of  credits — Problem  126. 

Dealer  Helps. 

Problem  59. 
Direct  and  Indirect  Exporting. 

Advantages  and  disadvantages — Problem  45. 

Organization   for — Problems   4    and    5 ;    committee    type — 

Problem  7  ;  location  of  department — Problem  1. 

Districting  of  Export  Sales  Territory. 

Problems  32  and  34. 
Economic  Theory  of  Foreign  Trade. 

Chapter  I,  page  1 ;  Problem  64. 
Export  Agents,  Exclusive  Agencies,  and  Agency  Contracts. 

Agency  contracts — Problem  60. 

Exclusive  agency — Problems  56  and  59. 

Export  agents — Problem  51. 


696     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 

Export  Combinations  and  the  Webb  Law. 

Problems  10  and  11. 
Export  Manager. 

Problem  17 ;  combination  manager — Problems  12  and  49. 
Export  Merchants  and  Commission  Houses. 

Problem  45. 
Export  Sales  Campaigns. 

Problem  34. 
Export  Salesmen. 

Advance  territory  work — Problem  103. 

Equipment — Problem  104. 

Management — Problem  106. 

Routing — Problem  103. 

Selection — Problem  94;  application  blanks — Problem  96. 

Training — Problems  99  and  100. 

Export  Sales  Quotas. 

Problem  33. 
Fairs  and  Expositions. 

Problem  78. 
Foreign  Branches. 

Problems  109  and  111. 
Freight  Forwarders. 

Problem  147. 
Freight  Rates. 

Problem  152. 
House  Organs. 

Problem  88. 
Marine  Insurance. 

Problem  152. 
Market  Analysis. 

Problem  25. 


BIBLIOGRAPHY  697 


Motion  Pictures. 

Problem  89. 
Packing. 

Problem  140. 

Parcel  Post. 

Problem  142. 
Price  Policy. 

Problems  64,  67  and  68. 
Product  Analysis. 

Problem  35. 
Research  and  Statistics. 

Problem  25. 
Sales  Control. 

Problems  155  and  158. 
Trade-marks. 

Problem  42. 


INDEX 


Acceptances — See :  Financing  Ship- 
ments. 

Accounts,  Collection  of — See :  Cred- 
its and  Collections. 

Act  of  Protest— 519. 

Adapting  Goods  to  Market — See: 
Product  Analysis  and  Policy. 

Adding  Machines — 124,  558. 

Addresses — See :    Mailing-lists. 

Adjustments — See:  Claims  and  Ad- 
justments. 

Administrative  Control  —  197,  672- 
686. 

Advance  Territory  Work — See :  Ad- 
vertising; Catalogs;  Correspon- 
dence ;  Salesmen,  Management 
of. 

Advantages  of  Foreign  Trade — 1. 

Advertising  —  581 ;  Agencies  —  93, 
331;  Appropriations — 330,  439; 
Campaigns  —  3  2  9;  Cooperation 
with  Other  Departments — 7  ;  Di- 
rect-mail—312,  323,  326,  407; 
Management— 331,  337;  Media— 
315,  330,  345;  Motion  Pictures— 
129,  338,  349;  Organization  for— 
93;  Policy— 19,  314,  334,  336. 

Allowances  —  See  :  Cancellations ; 
Claims  and  Adjustments. 

Argentina— 137,  140,  155,  158,  183, 
184,  235,  237,  270,  290,  327,  329, 
341,  392,  428,  430,  435,  447,  452, 
500,  526,  664,  668,  670,  680. 

Asia— 229,  305. 

Australia— 35,  338,  430,  452,  464, 
476,  493,  496,  567,  572,  578,  584, 
659,  670,  681. 

Austria — 452. 

Automobiles  and  Accessories — 71, 
329,  370,  398,  464;  Tires— 56,  180, 
568,  580. 

B 

Baggage — See:  Salesmen,  Equip- 
ment of. 

Banks,  Services  of— 125,  462,  463, 
465,  471,  474,  476,  500,  526,  581, 
627,  674,  678.  See  also:  Financ- 
ing Shipments. 

Belgium— 664,  674. 


Bill  of  Lading— 587,  610,  634.     See 

also :     Documentation. 
Bolivia— 159. 

Boots  and  Shoes — 158,  269,  480,  550. 
Branches  and   Branch   Factories — 9, 

10,  58,  77,  131,  154,  227,  327,  337, 

353,  389,  425-455,  664. 
Brand  Policy— 15,  182,  188. 
Brazil— 144,  154,  237,  240,  327,  329, 

430,  435,  505,  568,  665. 
Budgetary   Control— 92,   667. 
Bureau    of    Foreign    and    Domestic 

Commerce— 104-106,  124,  125,  150, 

434. 

C 

Cameras  and  Photographic  Supplies 
—130. 

Canada— 677,  681,  682,  684. 

Cardboard — See:  Paper  and  Paper 
and  Cardboard  Novelties. 

Cartage — See:    Delivery. 

Catalogs— 342. 

Chemicals— 188,   564,   586. 

Chile— 142,  159,  324,  327,  329,  435, 
454,    497,    510,    529. 

China — See:    Far  East. 

Circularizing  —  See :  Advertising  — 
Direct-mail;  Catalogs;  Corre- 
spondence. 

Claims  and  Adjustments — 274,  308, 
510,   528,   529. 

Clothing— 73,  81,  97,  139,  171,  308. 
See  also:    Findings. 

Coal— 529. 

Colombia— 147,   324,   497,   562. 

Combination   Salesmen- — 203,   359. 

Commercial   Invoice — 621. 

Commercial  Laws — 434,  436,  675. 

Commercial  Papers — See:  Documen- 
tation. 

Competition— 11,  433,  439,  443,  473, 
480,  660,  685. 

Confectionery — 600. 

Consignment  Sales — 351. 

Consular  Invoice — 607. 

Contracts— 211,   216,   251,   257,   260. 

Cooperation  of  Export  Department 
with  Other  Departments  —  See : 
Eelations  Between  Export  Depart- 
ments, etc. 


699 


700    PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


Cooperative  Export  Associations — • 
10,  62,  65,  69,  73,  354;  Credit  In- 
terchange—492,  538,  539,  540, 
541. 

Correspondence — 85,  340.  Sec  also  : 
Advertising  —  Direct-mail;  Cata- 
logs;   Parcel   Post;    Translations. 

Credentials  of  Salesmen  —  See  : 
Salesmen,  Equipment  of. 

Credits  and  Collections — 456-545 ; 
Foreign  Credit  Interchange  Bu- 
reau, forms  of — 538,  539,  540, 
541;  Eeports— 499,  505,  516.  In- 
surance of — 496  ;  Management — 
95,  354,  445;  Policy— 43-46,  298, 
351,  602,  670;   Kesearch— 101. 

Cuba— 154,  435,  452,  481,  504,  554, 
670. 

D 

Dealer    Helps— 17,    245,    334,    336, 

338. 
Delivery — 546-655. 
Denmark— 329,  428. 
Department  Stores — 25. 
Discounts— 18,  301,  303,  472. 
Distribution — 15,  16,  190-264;  Costs 

— 439;      Direct— 201,      234,      321, 

434,  439,  484;  Use  of  Salesmen— 

321,  330,  434,  683. 
Districting     Sales     Territory  — 148, 

158. 
Dock  Eeceipt — 605. 
Documentation — 546-655. 
Drafts — See :    Einaneing  Shipments. 
Drugs— 279. 

E 
Ecuador— 324. 
Electrical  Equipment — 37,  170,  384, 

394    572. 
Europe— 26,  305,  336,  417,  435,  473, 

485,  572,  576,  677,  683.     See  also: 

Individual  Countries. 
Exclusive    Agencies — 16,    213,    229, 

235,  237,  240,  245,  257,  261,  321, 

327,    440,    450,    550;    Advertising 

by— 334,     336 ;     Sub-agents— 261, 

327. 
Expenses  —  See :       Sales     Expense ; 

Salesmen,   Management  of. 
Export    Agent— 81,    113,    116,    224. 

See    also:      Contracts;     Exclusive 

Agents. 
Export  Combinations — See:    Cooper- 
ative Export  Associations. 
Export    Commission    Houses — 39-42, 

149,   188,   194-196,   201,   211,   220, 

310,  321,  353,  572, 


Export  Declaration- 608,  609. 

Export  Department  —  Built-in  —  6 ; 
Location — 5,  34-39 ;  Relation  to 
Other  Departments — 7,  54,  58, 
78,  87,  90,  97;  Eoutine— 547 ; 
Separate — 6,  7,  42-51,  59  ;  Split- 
ting—35-39. 

Export  Forwarder — 568,  572,  576, 

Export  Manager — Combination — 69, 
220;  Duties— 13,  14,  20,  57,  102, 
103,  415;  Relations  with  Other 
Departments — 78 ;  Selection — 81 ; 
Territorial — 53. 

Export  Merchant^ — 149, 

Export  Organization — 4-14,  23-99, 
230,  550;  Adaptation  to  Product 
and  Resources  — ■  71 ;  Committee 
Type — ^51 ;  Cooperative — 10,  62, 
65,  69,  73;  External  —  24-27 ; 
Forms  —  42-45;  Functional  —  56; 
Influence  of  Consumer  Upon — 24; 
Territorial — 78. 

Export  Personnel — Correspondent — 
57 ;  Foreign  Regulation  Expert — 
83.  See  also:  Export  Manager; 
Salesmen. 
Export  Policy— 13,  14,  15,  16,  17, 
18,  162-189;  Consignment  Sales — 
351 ;  Installment  Sales — 474. 
Export  Trade  Papers — See:  Adver- 
tising Media. 

F 
Factories   Abroad  —  See:    Branches 

and  Branch  Factories, 
Fairs— 322. 
Far  East— 25,  36,  168,  187,  230,  234, 

257,  306,  342,  428,  447,  473,  496, 

559,  562,  572,  576,  664,  670,  684, 

Filling  the  Order— 21,  546-655. 
Financing    Shipments — 20,    21,    442, 

456-545,   670,   674 ;    Acceptances — 

462,    535,    537;    Drafts— 462,    466, 

534,   625. 
Findings   (Braids,   Trimmings,  etc.) 

—73,  231,  298,  300,  354,  560. 
Fire  Apparatus — 113. 
Floor  Coverings — 475,   554. 
Foreign    Exchange — 270,    279,     143, 

515. 
France— 25,  270,  329,  338,  42S,  430, 

464,  059,   664. 
Freight  Forwarder — See :  Export 

Forwarder. 
Freight  Rates- 430,  431,  584. 

Government    Aid    and    Regulation — 
104-106,  661,  664,  684. 


INDEX 


701 


235,    270,    497, 


430,   473,   480, 
Sources    of    In- 


Great  Britain— 25,  35,  270,  308,  329, 
338,  342,  428,  430,  435,  447,  452, 
464,  659,  664. 

Guarantees — 15,  ]80. 

IT 
Hague  Eules — 641. 
Hardware — 45,    188, 

504,  515. 
Hats— 81,   97. 
Hosiery— 308. 
House  Organs — 345. 

I 
India— 35,   168,   230 

681. 
Information — See  : 

formation. 
Ink — See :    Office  Supplies. 
Insurance — See :    Marine  Insurance 
Investments — 316,  684. 
Italy— 338,  443,  464,  665. 

J 
Japan — See:    Far  East. 


Labels — See:   Brand  Policy. 

Languages  —  See:  Catalogs;  Cor- 
respondence ;  Salesmen,  Selection 
of;  Translations. 

Latin  America— 158,  166,  184,  225, 
229,  231,  245,  301,  303,  305,  336, 
342,  345,  371,  387,  417,  420,  454, 
464,  485,  504,  581,  584,  662.  See 
also:    South  America. 

Legal  Aspects — 436,  675. 

Letters  of  Credit— 412,  500. 

Letters  of  Introduction — See:  Sales- 
men,   Equipment   of. 

Loans,  Foreign — See:  Financing 
Shipments ;    Investments. 

Locomotives — 397. 

:\i 

Machinery — 188  ;  P  a  c  k  i  n  g — 127, 
562;  Printing— 87,  184,  452;  Tex- 
tile—177,  276,  350,  473;  Wood- 
■working — 342. 

Mailing-lists — 325.  See  also:  Adver- 
tising —  Direct-mail ;  Correspon- 
dence; Sources  of  Information. 

Manufacturing  for  Export— <S'ee  ; 
Product  Analysis  and  Policy. 

Marine  Insurance — 578,  584,  587, 
600,  623,  624,  629-655. 

Market  Analysis- 114,  116,  127,  130, 
167,  168,  230,  238,  324. 


Marks  on  Containers — See:  Packing. 
Mexico— 154,  159,  329,  428,  452,  454 

481,  491,  493,  496,  659,  665,  68o! 

681,  684. 
Motion    Pictures — See:    Advertising 

— Motion  Pictures. 
Musical  Instruments  —  Phonographs 

—337,  462;   Pianos — 237,  429. 

N 

Newspaper  s—See :  Advertising 
Media.  ^ 

New  Zealand — 35,  430,  464,  493  496 
681.  '         '         >        . 

O 

Office  Supplies — 184,  227  ''eO  3''3 
336,  417,   428,   496.  '      "  ' 

Oils— 234,  327,  374,  395,  44.5,  5] 9 
579. 

Optical  Goods — 340. 


Packing  and  Marking— 554,  558, 
559,  562,  566,  568;  Inspection  of 
Cargo— 564,  579. 

Paints--39,  347,  391,  402,  415,  420 
422  '         '         >         ) 

Paper,  and  Paper  and  Cardboard 
Novelties— 34,  51,  154,  184,  211, 
216,  274,  345,  387,  406,  439,  452 
454,  509,  512,  552. 

Paraguay— 159,  327. 

Parcel   Post — 559. 

Peru— 159,  324,  327,  558,  578. 

Philippines— 35,  206,  342,  464,  485, 
684.  ' 

Photographic  Materials— See;  Cam- 
eras and  Photographic  Supplies, 

Poland— 680. 

Porto  Bico— 223. 

Portugal — 675. 

Power  of  Attorney—  See:  Salesmen, 
Equipment  of. 

Price  Maintenance — 18,  305,  306. 

Prices  and  Price  Policy — 17,  18, 
265-309;  Adjustments— 274,  308, 
510,  528;  Competition — 270,  307; 
FLxing  by  Branch  Managers — 449, 
452;  In  Foreign  Currency — 270, 
279;  Levels— 269;  QuotJtions— 
290;  Resale— 18;  Uniformity— 
295,  300,  307;  Variation  by  Sales- 
men— 300. 

Product  Analysis  and  Policy — 15, 
164,   165,   170,   172,   173,  357. 

Provisions — 76,  188,  245. 


702     PROBLEMS  IN  EXPORT  SALES  MANAGEMENT 


E 

Razors— 116,  165,  229,  305,  434. 

Relations  Between  Export  and  Other 
Departments  —  Advertising  —  7 ; 
Credit— 7,  58,  474,  476,  480; 
Domestic  Sales— 8,  9,  87,  90,  416 ; 
Production— 92,  97,  416,  668;  Re- 
search—7 ;   Traffic— 8. 

Research  and  Planning — 10-13,  100- 
161. 

Retailing— 25,  231. 

Rubber  Goods— 56,  69,  492,  576. 

S 

Sales  Campaigns  —  158,  406.  See 
also :    Advertising. 

Sales  Contest— 420. 

Sales  Control— 656-672. 

Sales  Manual— 424. 

Salesmen,  Compensation  of  —  370, 
385,  390,  402,  404,  424. 

Salesmen,  Equipment  of— 409. 

Salesmen,  Management  of — 359-424, 
659;  Advance  Territory  Work— 
347,  406;  Expenses — 370,  394, 
406  424,  435;  Visits  to  Home 
Office— 418. 

Salesmen,  Reports  of — 423,  661. 

Salesmen,     Routing     of— 158,     423, 

661. 
Salesmen,  Selection  of— Application 

Blanks— 374,  385-389;   Languages, 

Knowledge     of— 368,     370,     392; 

Native  vs.  American — 387;  Quali- 
fications—360,  365,  370. 
Salesmen,  Stimulation  of — 420. 
Salesmen,     Training     of— 371,     391, 

394. 
Sales  Methods— 310-358. 
Sales  Promotion— 347,  679.  See  also: 

Advertising;   Sales  Campaigns. 
Sales  Quotas— 154,  659. 
Sales  Records— 656-672. 
Samples — 313. 

Scandinavia— 329,   428,   439,   464. 
Selling  Process— 19,  20. 
Service  and  Repairs — 177,  180. 
Sewing  Machines— 306,  334,  440. 
Shingles  and  Roofing  Paper— 48,  84, 

554,  566. 
Sources  of  Information — 10,  11,  103- 

108,   125-127,   459,   477,   480,  484, 

656. 


South  Africa— 35. 

South  America — 25,  36,  131,  159, 
260,  274,  326,  385,  391,  422,  473, 
493,  496,  510,  559,  562,  572,  576, 
578,  659,  668,  677,  683,  684.  See 
also :  Latin  America ;  also  vai'ioits 
countries  of  South  America. 

Spain— 430,   435,   665. 

Standardization  —  See :  Product 
Analysis. 

Steam  Fittings  and  Plumbing  Sup- 
plies—59,  148,  201,  220,  443,  583. 

Steel  Products- 353,  400,  500. 

Stores  System — 664. 

Style  Element— 139,  171. 

T 

Tariffs,  Duties,  etc. — 430,  681. 

Taylor   System — 55. 

Terms  of  Sale— 265-309,  456-545, 
579 ;  f.  0.  b.  vs.  c.  i.  f .— 276,  279, 
526. 

Textiles— 35,  90,  95,  175,  205,  224, 
240,   257,  326,  409. 

Tires — See:  Automobiles  and  Ac- 
cessories. 

Toilet  Preparations— 93,  301,  303. 

Tools— 470;  Carpenters '—65,  295; 
Garden— 62;    Machine — 321. 

Trade-marks,  Patents  and  Copy- 
rights—15,    184,   683. 

Translations — 343.  See  also:  Cata- 
logs ;    Correspondence. 

Typewriters— 114,  172,  251,  261, 
448. 


Uruguay — 327. 


Venezuela — 324. 


U 


V 


W 


Wall  Board- 554,  585. 
Warehousing— 439,    440,    566,    582, 

664. 
West    Indies— 493,    496,    519,    659, 

681,  684. 
Wholesalers— 227,    231. 
Wine  Shooks— 290,  526. 


Yarns— 182. 


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